Intro -- Bank Risk-Taking and Competition Revisited: New Theory and New Evidence -- Contents -- I. INTRODUCTION -- II …. THEORY -- III. EVIDENCE -- IV. CONCLUSION -- Appendix I. Pareto Dominant Equilibria -- References. …

banks can extract market power rents. We show that more bank competition results in lower economy-wide risk, lower bank … capital ratios, more efficient production plans and Pareto-ranked real allocations. Perfect competition supports a second best … allocation and optimal levels of bank risk and capitalization. These results are at variance with those obtained by a large …

-to-assets ratio is ambiguous. Similarly, as competition increases, the probability of bank failure can either increase or decrease. We …. The model predicts that as competition increases, both loans and assets increase; however, the effect on the loans …