Optimal Banking Structure Under Demand Externality

Asian Journal of Research in Banking and Finance, 2017

4 Pages Posted: 13 May 2020

See all articles by Indrajit Mallick

Indrajit Mallick

Centre for Studies in Social Sciences Calcutta

Date Written: 2017

Abstract

This paper studies optimal banking structure under demand externality. Firms operate under demand externalities. Investors choose the optimal banking coalition sizes and then try to maximize profits by optimal lending under Cournot competition. The focus of the paper is on optimal banking structure which maximizes bank profitability. It is shown that due to the demand externality facing firms, the privately optimal bank coalition has the minimum size but high lending.

Keywords: Optimal Bank Size, Demand Externality, Cournot Competition

JEL Classification: E, F

Suggested Citation

Mallick, Indrajit, Optimal Banking Structure Under Demand Externality (2017). Asian Journal of Research in Banking and Finance, 2017 , Available at SSRN: https://ssrn.com/abstract=3579412

Indrajit Mallick (Contact Author)

Centre for Studies in Social Sciences Calcutta ( email )

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