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Sequential Models of Bertrand Competition for Deposits and Loans under Asymmetric Information

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Author Info
Frédérique Bracoud (Keele University)

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Abstract

This paper analyzes sequential games of double-sided Bertrand competition in the deposit and credit markets, when banks are free to reject customers and cannot distinguish among borrowers. The timing of competition is crucial when customers apply once. Interest rates are pushed upwards when the deposit market is the first to be visited, whereas rates are submitted to downward pressures otherwise. With multiple applications, the order of competition does not matter. Multiple applications in one market weaken competition in that market and generate outcomes similar to the case when this market is visited in a second stage in the single-application framework.

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Publisher Info
Paper provided by EconWPA in its series Game Theory and Information with number 0211002.

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Length: 50 pages
Date of creation: 05 Nov 2002
Date of revision:
Handle: RePEc:wpa:wuwpga:0211002

Note: Type of Document - pdf; prepared on pc; pages: 50
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Web page: http://129.3.20.41

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Related research
Keywords: Financial intermediation; Bertrand competition; Dual competition; Adverse selection; Credit rationing;

Other versions of this item:

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Spulber, Daniel F, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-52, Summer. [Downloadable!] (restricted)
  2. Bhattacharya Sudipto & Thakor Anjan V., 1993. "Contemporary Banking Theory," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 2-50, October. [Downloadable!] (restricted)
  3. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x.
  4. Santomero, Anthony M, 1984. "Modeling the Banking Firm: A Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 576-602, November. [Downloadable!] (restricted)
  5. Gottardi, P. & Yanelle, M. O., 1998. "Financial Innovation and Competition among Intermediaries," DELTA Working Papers 98-02, DELTA (Ecole normale supérieure).
  6. Yanelle, Marie-Odile, 1997. "Banking Competition and Market Efficiency," Review of Economic Studies, Blackwell Publishing, vol. 64(2), pages 215-39, April. [Downloadable!] (restricted)
  7. Frederique Bracoud, 1999. "Bertrand Competition For Deposits And Loans Under Asymmetric Information: Stiglitz And Weiss Revisited," Research Papers 1999_01, University of Liverpool Management School.
  8. Stahl, Dale O, II, 1988. "Bertrand Competition for Inputs and Walrasian Outcomes," American Economic Review, American Economic Association, vol. 78(1), pages 189-201, March. [Downloadable!] (restricted)
  9. Yanelle, Marie-Odile, 1989. "The strategic analysis of intermediation," European Economic Review, Elsevier, vol. 33(2-3), pages 294-301, March. [Downloadable!] (restricted)
  10. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
  11. Toolsema, Linda A, 2001. "Reserve Requirements and Double Bertrand Competition among Banks," Applied Economics Letters, Taylor and Francis Journals, vol. 8(5), pages 291-93, May. [Downloadable!] (restricted)
  12. Yanelle, M. O., 1996. "Can intermediaries replace the Walrasian auctioneer?," DELTA Working Papers 96-23, DELTA (Ecole normale supérieure).
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Frédérique Bracoud, 2003. "Double Bertrand Competition among Intermediaries," Keele Economics Research Papers KERP 2003/09, Centre for Economic Research, Keele University. [Downloadable!]
  2. Timo Baas & Mechthild Schrooten, 2006. "‘Relationship Banking and SMEs: A Theoretical Analysis’," Small Business Economics, Springer, vol. 27(2), pages 127-137, October. [Downloadable!] (restricted)
    Other versions:
  3. Frederique Bracoud, 2007. "Double Bertrand competition among intermediaries when consumers can default," Economics Bulletin, Economics Bulletin, vol. 4(7), pages 1-16. [Downloadable!]
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