Interbank payment arrangements create tension between competition and cooperation among banks. One bank's payment services to a rival's depositors enhance the value of the rival's deposit services. The strategic effects of the pricing of interbank services are very different in a segmented...

It is often the case that banks in the US are willing to borrow in the fed funds market (the interbank market for funds) at higher rates than the ones they could obtain by borrowing at the Fed's discount window. This phenomenon is commonly explained as the consequence of the existence of a...