Financial Intermediation and Deposit Contracts: A Strategic View

Vittorio Larocca Larocca ()
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Vittorio Larocca Larocca: ETH Zurich, Switzerland

No 15/213, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: This paper investigates competition among financial intermediaries in a finite-trader version of the Diamond and Dybvig (1983) economy under no aggregate uncertainty. The economy is populated by self-interested financial intermediaries that compete strategically over deposit contracts offered to consumers. Both exclusive and nonexclusive competition perspective are considered, in both cases multiple equilibria arise if banks do not have an initial endowment. When financial intermediaries have a sufficient level of endowment, regardless the competition perspective adopted, the first best allocation is the unique equilibrium allocation.

Keywords: financial intermediation; deposit contracts. (search for similar items in EconPapers)
JEL-codes: D82 G21 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2015-04
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-com, nep-cta and nep-mic
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