We consider a spatial model of bank competition to study how the diffusion of information technology affects …/screening costs. If so, then bank competition intensifies, which reduces bank stability and brings about an ambiguous welfare effect … competition in the lending market, stability of the banking sector, and social welfare. We find that the effects of an improvement …

competition and stability in banking. There are two basic channels through which competition may increase instability: by … incentives to take risk and raise failure probabilities. The competition-stability trade-off is characterized and the … implications of the analysis for regulation and competition policy are derived. It is found that optimal regulation may depend on …