Financial Innovation and Competition among Intermediaries

Piero Gottardi and M. O. Yanelle

DELTA Working Papers from DELTA (Ecole normale supérieure)

Abstract: We analyze the competition among financial intermediaries in a model with product differentiation. The cases of one-sided competition, where banks compete in bid-ask spreads, and two-sided competition, where they compete for deposits and for loans separately, are compared. We show that under two-sided competition equilibrium profits and bid-ask spreads are lower and banks choose a smaller amount of differentiation, i.e., competition is fiercer in this case.

Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:del:abcdef:98-02

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