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Asymmetries in banking conduct: A Cournot - Bertrand model

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  • Dalla, Eleni

Abstract

This paper presents a Cournot – Bertrand model with differentiated loans and deposits. In this context, banks compete in different strategic variables, with bank 1 competing in quantities and bank 2 in interest rates. It is shown that loan and deposit differentiation are necessary conditions for a unique Nash equilibrium. The analysis constitutes a simple framework for the introduction of asymmetries in the behavior of oligopolistic banks, providing possible policy and bank ownership extensions.

Suggested Citation

  • Dalla, Eleni, 2023. "Asymmetries in banking conduct: A Cournot - Bertrand model," Economics Letters, Elsevier, vol. 233(C).
    • Handle: RePEc:eee:ecolet:v:233:y:2023:i:c:s0165176523004524
    DOI: 10.1016/j.econlet.2023.111426
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    References listed on IDEAS

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    6. Degryse, Hans, 1996. "On the Interaction between Vertical and Horizontal Product Differentiation: An Application to Banking," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 169-186, June.
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    More about this item

    Keywords

    Cournot-Bertrand model; Loan differentiation; Deposit differentiation;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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