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Multiple Equilibria in Markets with Screening

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  • ALEXIS DIRER

Abstract

This paper adds endogenous screening to Broecker (1990) and shows the possibility of multiple screening equilibria. A high intensity of screening by a bank decreases average quality of firms applying to other banks, which in turn have further incentives to screen. The link between the degree of concentration of the banking industry and the extension of credit is also discussed.

Suggested Citation

  • Alexis Direr, 2008. "Multiple Equilibria in Markets with Screening," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 791-798, June.
    • Handle: RePEc:wly:jmoncb:v:40:y:2008:i:4:p:791-798
    DOI: 10.1111/j.1538-4616.2008.00136.x
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    Cited by:

    1. Anthony Yezer & Pingkang Yu, 2016. "Costly Screening, Self-Selection, Fraud, and the Organization of Credit Markets," Working Papers 2016-4, The George Washington University, Institute for International Economic Policy.
    2. Hainz, Christa, 2008. "Bank Competition - When is it Good?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 244, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    3. Gehrig, Thomas & Stenbacka, Rune, 2011. "Decentralized screening: Coordination failure, multiple equilibria and cycles," Journal of Financial Stability, Elsevier, vol. 7(2), pages 60-69, June.
    4. Hachem, Kinda, 2021. "Inefficiently low screening with Walrasian markets," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 935-948.
    5. Gene Ambrocio, 2020. "Rational exuberance booms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 35, pages 263-282, January.

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