Abstract:We analyze the role of a state-owned bank, whose objective is to maximize social welfare, in a credit market with a mixed duopoly. The equilibrium reveals that the stateowned bank is exposed to lower credit risk than the private bank. Furthermore, when the deposit rate is raised by the monetary authority, both banks exert socially beneficial higher monitoring efforts. In modified models, we explore the effects of the cost-inefficiency and the political view of the state-owned bank. Extensions on partial nation… Show more
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