We consider a spatial model of bank competition to study how the diffusion of information technology affects competition in the lending market, stability of the banking sector, and social welfare. We find that the effects of an improvement in information technology depend on whether or not it...

I study the effects of information technology (IT) progress in a model where stock prices aggregate speculators' information and guide firms' investments. Speculators with limited attention acquire more information about firms with larger investment capacities. IT progress (i.e., lowering...