IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpga/0211002.html
   My bibliography  Save this paper

Sequential Models of Bertrand Competition for Deposits and Loans under Asymmetric Information

Author

Listed:
  • Frédérique Bracoud

    (Keele University)

Abstract

This paper analyzes sequential games of double-sided Bertrand competition in the deposit and credit markets, when banks are free to reject customers and cannot distinguish among borrowers. The timing of competition is crucial when customers apply once. Interest rates are pushed upwards when the deposit market is the first to be visited, whereas rates are submitted to downward pressures otherwise. With multiple applications, the order of competition does not matter. Multiple applications in one market weaken competition in that market and generate outcomes similar to the case when this market is visited in a second stage in the single-application framework.

Suggested Citation

  • Frédérique Bracoud, 2002. "Sequential Models of Bertrand Competition for Deposits and Loans under Asymmetric Information," Game Theory and Information 0211002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpga:0211002
    Note: Type of Document - pdf; prepared on pc; pages: 50
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/game/papers/0211/0211002.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Marie-Odile Yanelle, 1997. "Banking Competition and Market Efficiency," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 215-239.
    2. Daniel F. Spulber, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-152, Summer.
    3. Bhattacharya Sudipto & Thakor Anjan V., 1993. "Contemporary Banking Theory," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 2-50, October.
    4. Yanelle, Marie-Odile, 1989. "The strategic analysis of intermediation," European Economic Review, Elsevier, vol. 33(2-3), pages 294-301, March.
    5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    6. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, April.
    7. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, April.
    8. Santomero, Anthony M, 1984. "Modeling the Banking Firm: A Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 576-602, November.
    9. Frederique Bracoud, 1999. "Bertrand Competition For Deposits And Loans Under Asymmetric Information: Stiglitz And Weiss Revisited," Working Papers 1999_01, University of Liverpool, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xiaoqiang Cheng & Patrick VAN CAYSEELE, 2010. "State Aid and Competition in Banking: The Case of China in the Late Nineties," Working Papers id:2435, eSocialSciences.
    2. Frederique Bracoud, 2007. "Double Bertrand competition among intermediaries when consumers can default," Economics Bulletin, AccessEcon, vol. 4(7), pages 1-16.
    3. Timo Baas & Mechthild Schrooten, 2006. "‘Relationship Banking and SMEs: A Theoretical Analysis’," Small Business Economics, Springer, vol. 27(2), pages 127-137, October.
    4. repec:lic:licosd:25009 is not listed on IDEAS
    5. Biancini, Sara & Verdier, Marianne, 2023. "Bank-platform competition in the credit market," International Journal of Industrial Organization, Elsevier, vol. 91(C).
    6. van den End, Jan Willem & Tabbae, Mostafa, 2012. "When liquidity risk becomes a systemic issue: Empirical evidence of bank behaviour," Journal of Financial Stability, Elsevier, vol. 8(2), pages 107-120.
    7. repec:ebl:ecbull:v:4:y:2007:i:7:p:1-16 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Georges Dionne, 2003. "The Foundationsof Banks' Risk Regulation: A Review of Literature," THEMA Working Papers 2003-46, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    2. Biancini, Sara & Verdier, Marianne, 2023. "Bank-platform competition in the credit market," International Journal of Industrial Organization, Elsevier, vol. 91(C).
    3. Holtemöller Oliver, 2003. "Money Stock, Monetary Base and Bank Behavior in Germany / Geldmenge, Geldbasis und Bankenverhalten in Deutschland," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 223(3), pages 257-278, June.
    4. Holtemöller, Oliver, 2002. "Money and banks: Some theory and empirical evidence for Germany," SFB 373 Discussion Papers 2002,17, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    5. Agur, Itai, 2012. "Credit rationing when banks are funding constrained," The North American Journal of Economics and Finance, Elsevier, vol. 23(2), pages 220-227.
    6. Aldasoro, Iñaki & Balke, Florian & Barth, Andreas & Eren, Egemen, 2022. "Spillovers of funding dry-ups," Journal of International Economics, Elsevier, vol. 137(C).
    7. Chiesa, Gabriella, 2001. "Incentive-Based Lending Capacity, Competition and Regulation in Banking," Journal of Financial Intermediation, Elsevier, vol. 10(1), pages 28-53, January.
    8. Hans Gersbach & Jan Wenzelburger, 2001. "The Dynamics of Deposit Insurance and the Consumption Trap," CESifo Working Paper Series 509, CESifo.
    9. Elsas, Ralf & Krahnen, Jan Pieter, 2000. "Collateral, default risk, and relationship lending: An empirical study on financial contracting," CFS Working Paper Series 1999/13, Center for Financial Studies (CFS).
    10. J. Christina Wang, 2003. "Loanable funds, risk, and bank service output," Working Papers 03-4, Federal Reserve Bank of Boston.
    11. Messori, Marcello, 2014. "A Schumpeterian analysis of the credit market," Structural Change and Economic Dynamics, Elsevier, vol. 28(C), pages 43-59.
    12. Butzbach Olivier & von Mettenheim Kurt E., 2015. "Alternative Banking and Theory," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 5(2), pages 105-171, July.
    13. repec:ebl:ecbull:v:4:y:2007:i:7:p:1-16 is not listed on IDEAS
    14. Cresenta Fernando & Atreya Chakraborty & Rajiv Mallick, 2002. "The Importance of Being Known: Relationship Banking and Credit Limits," Finance 0209007, University Library of Munich, Germany.
    15. Frederique Bracoud, 2007. "Double Bertrand competition among intermediaries when consumers can default," Economics Bulletin, AccessEcon, vol. 4(7), pages 1-16.
    16. Winton, Andrew, 1997. "Competition among Financial Intermediaries When Diversification Matters," Journal of Financial Intermediation, Elsevier, vol. 6(4), pages 307-346, October.
    17. Hans Degryse & Steven Ongena, 2002. "Bank-Firm Relationships and International Banking Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 401-417.
    18. Hans Gersbach, 2002. "Financial Intermediation and the Creation of Macroeconomic Risks," CESifo Working Paper Series 695, CESifo.
    19. Robert M. Adams & Lars-Hendrik Röller & Robin C. Sickles, 2002. "Market Power in Outputs and Inputs: An Empirical Application to Banking," CIG Working Papers FS IV 02-33, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    20. Doris Neu Berger, 1998. "Industrial Organization of Banking: A Review," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(1), pages 97-118.
    21. Hakenes, Hendrik, 2003. "Banks as delegated risk managers," Papers 03-13, Sonderforschungsbreich 504.

    More about this item

    Keywords

    Financial intermediation; Bertrand competition; Dual competition; Adverse selection; Credit rationing;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpga:0211002. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.