Essays on pricing games with asymmetric players
Essays on pricing games with asymmetric players
In this thesis we study pricing games where asymmetric players compete for the right to sell their products or services to a common buyer. The sellers' asymmetries may be informational and be a consequence of a pre-existing contract relationship with the buyer. They may also derive from either specification or cost efficiency in the provision of the good or service they sell. The focus is on the impact that these symmetries have on the nature of the competition among the sellers and on the equilibrium price paid by the buyer.
In Chapter 2, two banks compete on interest rates for the provision of a loan to a firm in which one of the banks holds an equity stake. As opposed to his competitor, the equity-holding bank not only has more precise information on the creditworthiness of the firm but, regardless of her winning the loan contract, she receives dividend payments. As a result, the competition is biased in her favour and the equilibrium expected interest rate on the loan increases not only with the degree of informational differential between banks - as traditional theory would predict - but also with the size of the equity stake held by the informed bank.
Chapter 3 contains some evidence on the effectiveness of interest subsidies in relieving credit-rationing constraints. In the underlying pricing game, a firm is applying for a loan and interest payments on a fraction of it can be subsidised by a government agency. Bank competition is distorted by informational frictions and by market power (banks control unequal shares of the market or specialise in the provision of different forms of subsidies). If extended to existing clients, subsidies do not reach the intended beneficiaries and they end up generating a pure windfall for the bank-firm coalition. The bank managing the subsidy appropriates of at least part of this surplus by charging higher interest rates on the recipient's non-subsidised loans, and the extent of appropriation increases with the bank's monopoly power.
University of Southampton
Rapisarda, Grazia
9db9e643-d7d7-47ac-86b8-587b42bddb58
2002
Rapisarda, Grazia
9db9e643-d7d7-47ac-86b8-587b42bddb58
Rapisarda, Grazia
(2002)
Essays on pricing games with asymmetric players.
University of Southampton, Doctoral Thesis.
Record type:
Thesis
(Doctoral)
Abstract
In this thesis we study pricing games where asymmetric players compete for the right to sell their products or services to a common buyer. The sellers' asymmetries may be informational and be a consequence of a pre-existing contract relationship with the buyer. They may also derive from either specification or cost efficiency in the provision of the good or service they sell. The focus is on the impact that these symmetries have on the nature of the competition among the sellers and on the equilibrium price paid by the buyer.
In Chapter 2, two banks compete on interest rates for the provision of a loan to a firm in which one of the banks holds an equity stake. As opposed to his competitor, the equity-holding bank not only has more precise information on the creditworthiness of the firm but, regardless of her winning the loan contract, she receives dividend payments. As a result, the competition is biased in her favour and the equilibrium expected interest rate on the loan increases not only with the degree of informational differential between banks - as traditional theory would predict - but also with the size of the equity stake held by the informed bank.
Chapter 3 contains some evidence on the effectiveness of interest subsidies in relieving credit-rationing constraints. In the underlying pricing game, a firm is applying for a loan and interest payments on a fraction of it can be subsidised by a government agency. Bank competition is distorted by informational frictions and by market power (banks control unequal shares of the market or specialise in the provision of different forms of subsidies). If extended to existing clients, subsidies do not reach the intended beneficiaries and they end up generating a pure windfall for the bank-firm coalition. The bank managing the subsidy appropriates of at least part of this surplus by charging higher interest rates on the recipient's non-subsidised loans, and the extent of appropriation increases with the bank's monopoly power.
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Published date: 2002
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Local EPrints ID: 464834
URI: http://eprints.soton.ac.uk/id/eprint/464834
PURE UUID: 3a6cbd57-be90-4b83-a9db-075d92c65bf4
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Date deposited: 05 Jul 2022 00:04
Last modified: 16 Mar 2024 19:46
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Author:
Grazia Rapisarda
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