A note on loan market equilibrium when some borrowers are optimistic
AbstractWe study a loan market equilibrium in which some borrowers are optimistic and banks face imperfect competition. We show that the presence of optimistic borrowers reduces the interest rate paid by safe borrowers and increases the interest rate paid by risky borrowers. But it has no net impact on the banks' profits.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 30 (2010)
Issue (Month): 2 ()
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Banking; optimistic borrowers; imperfect competition;
Find related papers by JEL classification:
- G2 - Financial Economics - - Financial Institutions and Services
- D4 - Microeconomics - - Market Structure and Pricing
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