English   español  
Please use this identifier to cite or link to this item: http://hdl.handle.net/10261/57873
Share/Impact:
Statistics
logo share SHARE logo core CORE   Add this article to your Mendeley library MendeleyBASE

Visualizar otros formatos: MARC | Dublin Core | RDF | ORE | MODS | METS | DIDL
Exportar a otros formatos:

Title

Interbank competition with costly screening

AuthorsFreixas, Xavier; Hurkens, Sjaak ; Morrison, Alan D.; Vulkan, Nir
Issue Date2007
PublisherBerkeley Electronic Press
CitationBE Journal of Theoretical Economics 7(1): (2007)
AbstractWe analyze credit market equilibrium when banks screen loan applicants. When banks have a convex cost function of screening, a pure strategy equilibrium exists where banks optimally set interest rates at the same level as their competitors. This result complements Broecker's (1990) analysis, where he demonstrates that no pure strategy equilibrium exists when banks have zero screening costs. In our set up we show that interest rate on loans are largely independent of marginal costs, a feature consistent with the extant empirical evidence. In equilibrium, banks make positive profits in our model in spite of the threat of entry by inactive banks. Moreover, an increase in the number of active banks increases credit risk and so does not improve credit market efficiency: this point has important regulatory implications. Finally, we extend our analysis to the case where banks have differing screening abilities. Copyright © 2007 The Berkeley Electronic Press. All rights reserved.
URIhttp://hdl.handle.net/10261/57873
DOI10.2202/1935-1704.1356
Identifiersdoi: 10.2202/1935-1704.1356
e-issn: 1935-1704
Appears in Collections:(IAE) Artículos
Files in This Item:
File Description SizeFormat 
Interbank Competition.pdf219,3 kBAdobe PDFThumbnail
View/Open
Show full item record
Review this work
 


WARNING: Items in Digital.CSIC are protected by copyright, with all rights reserved, unless otherwise indicated.