We show that competing firms relax overall competition by lowering future barriers to entry. We illustrate our findings in a two-period model with adverse selection where banks strategically commit to disclose borrower information. By doing this, they invite rivals to enter their market....

Recent experience from Europe and Japan shows that commercial banks generally pass negative short-term policy rates on to wholesale depositors, such as insurances and pension funds. Yet, they refrain from charging negative rates to ordinary retail customers. This paper asks whether the existing...

Investment in information acquisition can be used strategically by banks as a commitment device to augment market power. A static two-period economy with informationally heterogeneous banks is analysed. Information acquisition limits asymmetries of information and competitors' rents ex post. If...

In response to subprime loan abuses, it is common for policymakers to exhort consumers to comparison-shop for residential mortgages. This policy prescription ignores the fact that price revelation works differently in the prime and subprime markets, impeding search in subprime. In the prime...

We model the impact of bank mergers on loan competition, banks' reserve holdings and aggregate liquidity. Banks compete in a differentiated loan market, hold reserves against liquidity shocks, and refinance in the interbank market. A merger creates an internal money market that induces financial...

In transition economies, banks do not yet play a crucial role in financing investment. We explain the low degree of bank intermediation by investigating credit offers by monopolistic, oligopolistic, and competitive banks with a particular focus on collateral. The more market power that banks...

We investigate how bank competition affects the efficiency of credit allocation, using a model of spatial competition. Our analysis shows that bad loans are more likely the larger the number of banks competing for customers. We study further how many banks will be active if market entry is not...

In this paper we focus on fair value measurements in the Financial Crisis and its (continuing) aftermath. We consider different ways of measuring fair value; and we use the experience of economies under stress, and where markets deviate significantly from textbook models of symmetric information...

We study how information sharing between banks influences the geographical clustering of branches. We construct a spatial oligopoly model with price competition that explains why bank branches cluster and how the introduction of information sharing impacts clustering. Dynamic data on 59,333...