Asymmetric information and the structure of the banking industry

Article Abstract:

We analyze the effects of informational asymmetries on the market structure of the banking industry in a multi-period model of spatial competition. In the process of lending, incumbent banks gather proprietary information about their clients, acquiring an advantage over potential entrants. We show that these informational asymmetries are important determinants of the industry structure and of banks' strategic behavior. Contrary to traditional models of horizontal differentiation, the steady-state equilibrium is characterized by a finite number of banks even in the absence of exogenous fixed costs. In addition, less concentrated industry structures may be associated with higher interest rates. JEL classification: D43; D82; G21 Keywords: Banking; Barriers to entry; Spatial competition

---

The non-monetary nature of gifts

Article Abstract:

This paper addresses the prevalence of non-monetary gifts over more highly valued and efficient monetary transfers in social relationships. We demonstrate that under a wide variety of circumstances, inefficient non-monetary gifts will be offered by a donor in lieu of cash in order to signal the donor's quality of information about the recipient's preferences. This result emerges because gift giving is inefficient relative to cash, and not because of any arbitrary assumptions regarding communication. In particular, the donor has available the strategy of offering cash and saying what he would have purchased. Nonetheless, there is still an important equilibrium role for buying gifts. JEL classification: A13; D10; D64; D82; Z1 Keywords: Gifts; Non-monetary exchange; Signaling

---

Similar abstracts:

• Abstracts: Clustering of initial public offerings, information revelation and underpricing

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.