Screening, Bidding, and the Loan Market Tightness

Arbeitspapier

Bank loans are more available and cheaper for new and small businesses in the US in areas with highly concentrated banks than in areas with highly competitive banks. We explain this fact by analyzing banks' decisions to screen risky projects and their subsequent competition in loan provisions. It is shown that, by increasing a negative informational externality to an informed winner, an increase in the number of banks in the market can reduce banks' screening probability sufficiently, reduce the number of banks that actively compete in loan provisions and increase the expected loan rate. Policy implications are examined.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Queen's Economics Department Working Paper ; No. 989

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Auctions ; Information and Product Quality; Standardization and Compatibility
• Subject: Screening ; Bidding ; Loans ; Informational externality

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Shi, Shouyong ; Cao, Melanie
• Event: Veröffentlichung
• (who): Queen's University, Department of Economics
• (where): Kingston (Ontario)
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/189279
• Last update: 10.03.2025, 11:44 AM CET