Arbeitspapier
Implicit interest as price discrimination in the bank deposit market
1n this paper the theory af nonlinear multiproduct pricing is applied to the problem of determining the terms af liquid bank deposits such as cheque accounts. The prafit maximizing interest rate and service charge schedules are characterized within a madel of a manopolybank with a heterogeneous clientele. It is shown that the practice of "implicit interest", meaning below-cost pricing of payment services parallel with large interest margins on deposits, may well be part of the optimal price discrimination strategy. It is also shown that necessary conditians for that kind of cross subsidization to be optimal exist in an inventary theoretic madel of the demand for cheque account services. It is argued that the failure to take (second-degree) price discrimination into account invalidates much of the previous research on demand deposit pricing.
- ISBN
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951-686-385-X
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Finland Discussion Papers ; No. 1/1994
- Classification
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Wirtschaft
- Event
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Geistige Schöpfung
- (who)
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Tarkka, Juha
- Event
-
Veröffentlichung
- (who)
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Bank of Finland
- (where)
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Helsinki
- (when)
-
1994
- Handle
- Last update
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10.03.2025, 11:46 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Tarkka, Juha
- Bank of Finland
Time of origin
- 1994
Other Objects (12)
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Inferring market power from retail deposit interest rates in the euro area
Deposit insurance: Pricing and incentives
Competitive deposit rates and bank service charges
Switching costs in the Finnish retail deposit market
Fixed rate loan contracts, maturity transformation and competition in the deposit market
The effects of competition on banks' risk taking with and without deposit insurance
A case for interest rate smoothing
Ageing, interest rates, and financial flows
Nonlinear dynamics of interest rate and inflation
Two tales of the natural rate of interest
The interest rate sensitivity of output in Finland
Approaches to deposit pricing: a study in the determination of deposit interest and bank service charges
Inferring market power from retail deposit interest rates in the euro area
Deposit insurance: Pricing and incentives
Competitive deposit rates and bank service charges
Switching costs in the Finnish retail deposit market
Fixed rate loan contracts, maturity transformation and competition in the deposit market
The effects of competition on banks' risk taking with and without deposit insurance
A case for interest rate smoothing
Ageing, interest rates, and financial flows
Nonlinear dynamics of interest rate and inflation
Two tales of the natural rate of interest
The interest rate sensitivity of output in Finland
Approaches to deposit pricing: a study in the determination of deposit interest and bank service charges
Inferring market power from retail deposit interest rates in the euro area
Deposit insurance: Pricing and incentives
Competitive deposit rates and bank service charges
Switching costs in the Finnish retail deposit market
Fixed rate loan contracts, maturity transformation and competition in the deposit market
The effects of competition on banks' risk taking with and without deposit insurance
A case for interest rate smoothing
Ageing, interest rates, and financial flows
Nonlinear dynamics of interest rate and inflation
Two tales of the natural rate of interest