Xavier, Freixas; Sjaak, Hurkens; D, Morrison Alan; Nir, … - In: The B.E. Journal of Theoretical Economics 7 (2007) 1, pp. 1-27
We analyze credit market equilibrium when banks screen loan applicants. When banks have a convex cost function of screening, a pure strategy equilibrium exists where banks optimally set interest rates at the same level as their competitors. This result complements Broecker's (1990) analysis,...