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Relative Performance Evaluations in a Model of Financial Intermediation

Author

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  • Satoshi Kawanishi

    (Sophia University)

Abstract

This paper focuses on the delegation of bank managers of lending decisions to their agents typically subordinate employees of the bank. We assume that agents may base their decisions about lending to borrowers on decisions other banks have made about these same borrowers. Then we show that there exist some lazy or negligent agents who neither directly monitor the borrower nor imitate the other banks if managers use relative performance evaluations as incentive schemes. In addition, it is shown that the learning or adjustment process of agents exhibits cyclical dynamics. (Copyright: Elsevier)

Suggested Citation

  • Satoshi Kawanishi, 2000. "Relative Performance Evaluations in a Model of Financial Intermediation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 801-830, October.
    • Handle: RePEc:red:issued:v:3:y:2000:i:4:p:801-830
    DOI: 10.1006/redy.1999.0091
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    References listed on IDEAS

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    1. Fudenberg, Drew & Levine, David, 1998. "Learning in games," European Economic Review, Elsevier, vol. 42(3-5), pages 631-639, May.
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    Cited by:

    1. Jiancai Pi & Zixin Li, 2024. "Relative performance evaluation and wage inequality," Manchester School, University of Manchester, vol. 92(3), pages 296-312, June.

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    More about this item

    Keywords

    relative performance evaluation; imitation; negligence; random matching game; evolutionary game theory;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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