The role of screening and cross-selling in bank-firm relationships

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The role of screening and cross-selling in bank-firm relationships

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Cosci Stefania
Meliciani Valentina

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Valentina Meliciani

Abstract

This paper presents a monopolistic competition model of a bank choosing the optimal level of the screening effort in the presence of cross-selling activities. We demonstrate that, in absence of informational synergies, the larger is the range of services that the bank produces, the lower is the optimal screening effort. The paper also analyses the impact of competition in the lending market on cross-selling activities and finds that, for sufficiently low levels of transportation costs, an increase in competition in the lending market increases the expected profitability of services, thus increasing banks’ incentives to engage in cross-selling activities.

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Paper provided by Department of Communication, University of Teramo in its series wp.comunite with number 0033.

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Date of creation: Nov 2007
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Handle: RePEc:ter:wpaper:0033

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-12-01 (All new papers)
NEP-BAN-2007-12-01 (Banking)
NEP-COM-2007-12-01 (Industrial Competition)

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