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Non-Uniform Wealth Distribution in a Simple Spatial Banking Model

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  • Gabriel Montes-Rojas

Abstract

This paper uses a static spatial banking model with a non-uniform wealth distribution to provide theoretical assessments for differences in banks' prices and locations across regions. It assumes imperfect information, where banks know more about individuals if they are “near” the bank and individuals incur in a cost proportional to this distance to show the viability of their projects to the bank. A free entry model is constructed to account for banks' tendency to concentrate in rich regions and to charge lower prices. Comparative statics exercises show the effect of changes in the monitoring technology and wealth dispersion.

Suggested Citation

  • Gabriel Montes-Rojas, 2008. "Non-Uniform Wealth Distribution in a Simple Spatial Banking Model," Journal of Applied Economics, Taylor & Francis Journals, vol. 11(1), pages 145-165, May.
    • Handle: RePEc:taf:recsxx:v:11:y:2008:i:1:p:145-165
    DOI: 10.1080/15140326.2008.12040502
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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