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Industrial loans and market structure

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  • Gonzalez-Maestre, Miguel
  • Granero, Luis M.

Abstract

This paper is concerned with the interactions between the structure of the banking sector and the product market. We consider a framework where firms' installation costs are financed by means of industrial loans from specialized banks. Initially, we assume that an exogenous number of banks compete in providing loans before the firms compete in prices in a market with product differentiation. We show that even a small decrease in the number of banks can cause a dramatic fall in competition among firms.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 47 (2003)
Issue (Month): 5 (October)
Pages: 841-855

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Handle: RePEc:eee:eecrev:v:47:y:2003:i:5:p:841-855

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References

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  1. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Corporate structure, liquidity, and investment: evidence from Japanese industrial groups," Finance and Economics Discussion Series 82, Board of Governors of the Federal Reserve System (U.S.).
  2. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
  3. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  4. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
  5. Cestone, Giacinta & White, Lucy, 2002. "Anti-Competitive Financial Contracting: The Design of Financial Claims," CEPR Discussion Papers 3182, C.E.P.R. Discussion Papers.
  6. Berger, Allen N. & Klapper, Leora F. & Udell, Gregory F., 2001. "The ability of banks to lend to informationally opaque small businesses," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2127-2167, December.
  7. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Enrica Detragiache & Paolo Garella & Luigi Guiso, 2000. "Multiple versus Single Banking Relationships: Theory and Evidence," Journal of Finance, American Finance Association, vol. 55(3), pages 1133-1161, 06.
  9. Gonzalez-Maestre, M. & Granero, L.M., 1997. "Industrial Loans and Market Structure," UFAE and IAE Working Papers 396.97, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  10. Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-83, September.
  11. Mitchell A. Petersen & Raghuram G. Rajan, 1994. "The Effect of Credit Market Competition on Lending Relationships," NBER Working Papers 4921, National Bureau of Economic Research, Inc.
  12. GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "Entry (and exit) in a differentiated industry," CORE Discussion Papers RP -400, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July.
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Citations

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Cited by:
  1. Gonzalez-Maestre, Miguel & Granero, Luis M., 2003. "Industrial loans and market structure," European Economic Review, Elsevier, vol. 47(5), pages 841-855, October.
  2. Giacinta Cestone & Lucy White, . "Anti-Competitive Financial Contracting: The Design Of Financial Claims," UFAE and IAE Working Papers 453.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. Viktors Stebunovs & Fabio Ghironi, 2008. "The Domestic and International Effects of Financial Deregulation," 2008 Meeting Papers 676, Society for Economic Dynamics.
  4. Kotsios, Panayotis, 2010. "Regulatory Barriers to Entry in Industrial Sectors," MPRA Paper 27976, University Library of Munich, Germany.

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