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AbstractThis study utilizes a dominant‐bank model to investigate whether an increase in retail loan and deposit‐market concentration increases the incentives for both dominant and fringe banks to monitor their loans and thereby improve the quality of their loan portfolios. It shows that the effects on banks' incentives to engage in monitoring aimed at eliminating loan default losses in response to increased concentration of retail market shares of loans and deposits depend critically on whether the banks' asset and liability choices are interdependent. When the asset and liability decisions of both dominant and fringe banks are independent, a shift in market shares in favor of the dominant bank generates a straightforward increase in the incentives of all banks to monitor their loans. Under portfolio interdependence, the effects on monitoring outcomes at dominant banks and at banks within the competitive fringe depend on more complicated configurations of parameters. This fact helps explain mixed empirical evidence on the relationships between bank competition and measures of bank risk and soundness.

This book provides an evaluation of the industrial organization of banking with a focus on the interrelationship among bank behavior, market structure, and regulation. It addresses a wide range of public policy topics, including bank competition and risk, international banking, antitrust issues, and capital regulation. New to this edition, which has been updated throughout, is a broadened consideration of alternative theories of competition among banks, which includes discussions of such issues as the implications of large increases in bank reserve holdings in recent years, effects of nonprice competition through quality rivalry, analysis of mixed market structures involving both large and small banks, and international interactions of banks and policymakers. The intent of the book is to serve as a learning tool and reference for graduate students, academics, bankers, and policymakers seeking to better understand the industrial organization of the banking sector and the effects of banking regulations.

The goal of this original and relevant book is to provide a complete overview, exposition, and evaluation of the interplay among bank behavior, market structure, and regulation. It also considers implications for a variety of public policy issues.

Foundations of electronic commerce -- Applying basic economic principles to electronic commerce -- Imperfect competition, virtual products, and network industries -- Business strategies and conduct in the electronic marketplace -- Searching for information in electronic markets -- E-commerce intermediaries and two-sided markets -- Internet advertising -- Innovation, intellectual property rights, and the Internet -- Public policy issues in electronic markets -- Internet regulation and net neutrality -- The public sector and the electronic marketplace -- Electronic commerce and the world trading system -- The economics of online banking and finance -- Digital money and aggregate economic activity

The academic literature commonly examines issues relating to bank behavior, market structure, or bank regulation by abstracting from interrelationships among these factors. From a policy perspective, however, these elements of the industrial organization of banking are inextricably linked. The goal of this book is to provide a complete overview, exposition, and evaluation of the interplay among bank behavior, market structure, and regulation. It also considers implications for a variety of public policy issues, including bank competition and risk, market discipline, antitrust issues, capital regulation, and regulatory restructuring. The book can serve as a learning tool and reference for graduate students and academics, as well as bankers and policymakers studying the industrial organization of the banking sector and interested in the impacts of banking regulations.

This paper analyzes a model in which there is excessive bank lending and in which regulators attempt to correct the problem with a tax. A tax on lending can correct the over‐lending problem by reducing the returns from lending. Imposition of the tax has a perverse effect on the composition of lending, however, because it falls more heavily on banks that incur expenses to reduce loan losses. Hence, along the external margin, the share of banks that voluntarily monitor loans decreases. In contrast, monetary policy tightening can produce the optimal level of lending without generating any distortion of monitoring incentives.

This paper investigates the relationship between firm mark‐ups and inflation. In sectors of the economy with industries characterized by flexible prices and sticky wages, mark‐ups should respond positively to inflation. Industry mark‐ups in sectors with both flexible prices and flexible wages theoretically may rise or fall in response to an increase in the price level. Mark‐ups of industries in sectors of the economy in which prices are sticky should respond negatively to inflation, with an absolutely larger negative response occurring in sticky‐price industries with flexible wages. Empirical analysis of US industries provides support for nearly all of these theoretical predictions.

Introduction to the global economy -- Understanding the global economy -- Comparative advantage : how nations can gain from international trade -- International trade : enduring issues -- Sources of comparative advantage -- Regulating international trade : trade policies and their effects -- Regionalism and multilateralism -- International finance : enduring issues -- Balance of payments and foreign exchange markets -- Exchange-rate systems, past to present -- The power of arbitrage : purchasing power and interest rate parities -- Global money and banking : where central banks fit into the world economy -- Contemporary global economic issues and policies -- Can globalization lift all boats? -- Economic development -- Industrial structure and trade in the global economy : businesses without borders -- The public sector in the global economy -- Dealing with financial crises : does the world need a new international financial architecture? -- Glossary -- Index