Pricing Returned Check Charges under Asymmetric Information
Consumer deposit pricing has recently been the subject of close public scrutiny. Banks have been accused of monopolistically setting fees for some of their deposit services at levels greater than associated costs. This paper examines consumer deposit pricing in a world characterized by imperfect information about a heterogeneous customer population. It is demonstrated that banks, in order to minimize an adverse selection problem, utilize a menu of pricing elements including NSF fees, minimum balance requirements, and deposit hold schedules. As a result, competitive banks may be deliberately overcharging for some component deposit services while simultaneously undercharging for others. Copyright 1986 by Ohio State University Press.
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Volume (Year): 18 (1986)
Issue (Month): 4 (November)
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