Market power and risk taking behavior of banks
We consider a monopolistically competitive banking sector in order to analyze the effects of market concentration on the risk-taking behavior of banks. We show that, under full deposit insurance, a higher level of competition induces banks to invest in a risky asset. When the market concentration is high banks tend to take less risk. We also show that maximum social welfare is achieved either through free entry or through entry restriction.
Volume (Year): 21 (2006)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.colmex.mx/centros/cee/|
More information through EDIRC
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.:
- Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
- Matutes, Carmen & Vives, Xavier, 1996. "Competition for Deposits, Fragility, and Insurance," Journal of Financial Intermediation, Elsevier, vol. 5(2), pages 184-216, April.
- Perotti, Enrico C & Suarez, Javier, 2001.
"Last Bank Standing: What Do I Gain if You Fail?,"
CEPR Discussion Papers
2933, C.E.P.R. Discussion Papers.
When requesting a correction, please mention this item's handle: RePEc:emx:esteco:v:21:y:2006:i:1:p:55-84. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rocío Contreras)
If references are entirely missing, you can add them using this form.