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Pricing Returned Check Charges under Asymmetric Information

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  • Udell, Gregory F

Abstract

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.

Suggested Citation

  • Udell, Gregory F, 1986. "Pricing Returned Check Charges under Asymmetric Information," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(4), pages 495-505, November.
  • Handle: RePEc:mcb:jmoncb:v:18:y:1986:i:4:p:495-505
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    Cited by:

    1. João Santos, 1998. "Commercial Banks in the Securities Business: A Review," Journal of Financial Services Research, Springer;Western Finance Association, vol. 14(1), pages 35-60, July.
    2. Mark S. Carey & Stephen D. Prowse & John Rea & Gregory F. Udell, 1993. "The economics of the private placement market," Staff Studies 166, Board of Governors of the Federal Reserve System (U.S.).

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