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How do banks offer and price mortgages when an online platform enables them to also reach regions in which they have no branches? We use unique data on responses from many banks to all applying households and exploit exogenous changes in market concentration with a shiftshare instrument. We find that banks offer mortgage credit more often and at lower margins in more concentrated local markets. We can understand this surprising finding considering their expected future profits. Banks also improve their inter-regional portfolio diversification with more attractive offers to regions more complementary to their home locales. Finally, banks` choices become increasingly automated, reducing their operating costs.
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Basten et al. (2019) studied this question.