Financial Innovation and Competition among Intermediaries
AbstractWe analyze the competition among financial intermediaries in a model with product differentiation. The cases of one-sided competition, where banks compete in bid-ask spreads, and two-sided competition, where they compete for deposits and for loans separately, are compared. We show that under two-sided competition equilibrium profits and bid-ask spreads are lower and banks choose a smaller amount of differentiation, i.e., competition is fiercer in this case.
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Bibliographic InfoPaper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 98-02.
Date of creation: 1998
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