Spatial Competition Among Financial Service Providers and Optimal Contract Design

Robert M. Townsend
Victor Zhorin
Publication Type: 
Working Papers
Publication Year: 
2013

We present a contract-based model of industrial organization that allows us to consider in a unified way both different information frictions (moral hazard, adverse selection) and a variety of market structures (monopoly, perfect and imperfect competition, strategic interaction). We show how this method can be applied to banking and insurance industries. Transitions from extractive local monopoly organizations to globally competitive inclusive environments are discussed alongside with frictions affecting the outcome of such transitions.

Region: 
Global
Country: 
Global
Topic: 
Economic Modeling
Topic: 
Credit
Topic: 
Savings
Topic: 
Insurance
Topic: 
Financial Institutions