Abstract:
This paper investigates competition among financial intermediaries in a finite-trader version of the Diamond and Dybvig (1983) economy under no aggregate uncertainty. The economy is populated by self-interested financial intermediaries that compete strategically over deposit contracts offered to consumers. Both exclusive and nonexclusive competition perspective are considered, in both cases multiple equilibria arise if banks do not have an initial endowment. When financial intermediaries have a sufficient level of endowment, regardless the competition perspective adopted, the first best allocation is the unique equilibrium allocation.