A note on loan market equilibrium when some borrowers are optimistic

We study a loan market equilibrium in which some borrowers are optimistic and banks face imperfect competition. We show that the presence of optimistic borrowers reduces the interest rate paid by safe borrowers and increases the interest rate paid by risky borrowers. But it has no net impact on the banks' profits.

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Year of publication:	2010
Authors:	Niu, Jijun
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 30.2010, 2, p. 1210-1216
Publisher:	AccessEcon
Subject:	Banking \| optimistic borrowers \| imperfect competition

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Extent:	application/pdf
Type of publication:	Article
Classification:	G2 - Financial Institutions and Services ; D4 - Market Structure and Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008516065