Sequential Models of Bertrand Competition for Deposits and Loans under Asymmetric Information
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.
|Date of creation:||Sep 2002|
|Date of revision:|
|Note:||Revised version of F. Bracoud (1999), Bertrand Competition for Deposits and Loans under Asymmetric Information: Stiglitz andWeiss Revisited, mimeo, Liverpool Research Papers in Economics, Finance and Accounting 9901.|
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- 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.
- Daniel F. Spulber, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-152, Summer.
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