A preliminary version entitled “A Dynamic Model of Credit Allocation” was presented at the 1999 Annual Meetings of the Society for Economic Dynamics and at the 1999 ESEM Congress in Santiago de Compostela. Useful comments by Patrick Fève, Pierre Picard, and an anonymous referee are gratefully acknowledged. Any errors or omissions are my own.
Multiple Equilibria in Markets with Screening
Version of Record online: 15 MAY 2008
© 2008 The Ohio State University
Journal of Money, Credit and Banking
Volume 40, Issue 4, pages 791–798, June 2008
How to Cite
DIRER, A. (2008), Multiple Equilibria in Markets with Screening. Journal of Money, Credit and Banking, 40: 791–798. doi: 10.1111/j.1538-4616.2008.00136.x
- Issue online: 15 MAY 2008
- Version of Record online: 15 MAY 2008
- Received November 2, 2004; and accepted in revised form April 2, 2007.
- asymmetric information;
This paper adds endogenous screening to Broecker (1990) and shows the possibility of multiple screening equilibria. A high intensity of screening by a bank decreases average quality of firms applying to other banks, which in turn have further incentives to screen. The link between the degree of concentration of the banking industry and the extension of credit is also discussed.