Villa, Alessandro T. - 2022
allows banks to price discriminate and charge firm-specific markups in excess of default premia. In turn, the cross …-sectional dispersion of markups amplifies the impact of macroeconomic shocks. During a crisis, banks exploit their market power to extract … higher markups, inducing a larger decline in real activity. When a "big" (i.e., non-atomistic) bank fails, the remaining …