Economic Regulation in the Consumer Loans Market
This paper models a consumer loan market with a vertical structure where an upstream monopolist supplies funds to downstream nonbanks. The nonbanks supply funds to consumers in the consumer loans market. An inverse demand function of the consumer is linear. The downstream nonbank freely enters the m...
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| Veröffentlicht in: | Atlantic economic journal 2020-12, Vol.48 (4), p.447-459 |
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| creator | Mori, Nobuhiro Okamura, Makoto Ohkawa, Takao |
| description | This paper models a consumer loan market with a vertical structure where an upstream monopolist supplies funds to downstream nonbanks. The nonbanks supply funds to consumers in the consumer loans market. An inverse demand function of the consumer is linear. The downstream nonbank freely enters the market as long as it earns a positive profit. First, this paper derives free-entry equilibrium without government regulation. Next, this paper examines the effects of government regulation on the entry of nonbanks. Two regulatory schemes are investigated: partial regulation, wherein the government can only control the interest rate the monopolist sets, and full regulation, wherein the government can control the number of nonbanks as well as the interest rate. This paper presents four new results. First, downstream firms insufficiently enter the market under partial regulation. Second, downstream firms excessively enter the market under full regulation. Third, the establishment of the upstream public firm improves welfare even though its profit is negative under partial regulation. Fourth, full regulation is welfare improving compared to partial regulation. |
| doi_str_mv | 10.1007/s11293-020-09685-z |
| format | Article |
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The nonbanks supply funds to consumers in the consumer loans market. An inverse demand function of the consumer is linear. The downstream nonbank freely enters the market as long as it earns a positive profit. First, this paper derives free-entry equilibrium without government regulation. Next, this paper examines the effects of government regulation on the entry of nonbanks. Two regulatory schemes are investigated: partial regulation, wherein the government can only control the interest rate the monopolist sets, and full regulation, wherein the government can control the number of nonbanks as well as the interest rate. This paper presents four new results. First, downstream firms insufficiently enter the market under partial regulation. Second, downstream firms excessively enter the market under full regulation. Third, the establishment of the upstream public firm improves welfare even though its profit is negative under partial regulation. 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Fourth, full regulation is welfare improving compared to partial regulation.</description><subject>Consumers</subject><subject>Economics</subject><subject>Economics and Finance</subject><subject>Interest rates</subject><subject>International Economics</subject><subject>Loans</subject><subject>Macroeconomics/Monetary Economics//Financial Economics</subject><subject>Markets</subject><subject>Microeconomics</subject><subject>Monopolies</subject><subject>Public Finance</subject><subject>Regulation</subject><subject>Welfare</subject><issn>0197-4254</issn><issn>1573-9678</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2020</creationdate><recordtype>article</recordtype><sourceid>7TQ</sourceid><sourceid>ABUWG</sourceid><sourceid>AFKRA</sourceid><sourceid>AZQEC</sourceid><sourceid>BENPR</sourceid><sourceid>CCPQU</sourceid><sourceid>DWQXO</sourceid><sourceid>GNUQQ</sourceid><recordid>eNp9UEtLAzEQDqJgrf4BTwHP0cl7c5SlPqAiiJ5Dus3WrW1Sk92D_fVGV-jNwzCH-V7zIXRJ4ZoC6JtMKTOcAAMCRlWS7I_QhErNiVG6OkYToEYTwaQ4RWc5r6GQqDATBLMmhrjtGvziV8PG9V0MuAu4f_e4jiEPW5_wPLqQ8ZNLH74_Ryet22R_8ben6O1u9lo_kPnz_WN9OycNV9ATof2CetqWRIIZcJT7Mq2sKq60BNOCB2BONsCFWXq5qJheaiO5Uowz5_gUXY26uxQ_B597u45DCsXSMmFAAJiiNUVsRDUp5px8a3ep27r0ZSnYn2bs2IwtOexvM3ZfSHgk-fJ7lw8ULangDLQqED5CcjmGlU8H93-EvwGUe26S</recordid><startdate>20201201</startdate><enddate>20201201</enddate><creator>Mori, Nobuhiro</creator><creator>Okamura, Makoto</creator><creator>Ohkawa, Takao</creator><general>Springer US</general><general>Springer Nature B.V</general><scope>OQ6</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>0-V</scope><scope>3V.</scope><scope>7TQ</scope><scope>7WY</scope><scope>7WZ</scope><scope>7XB</scope><scope>87Z</scope><scope>88J</scope><scope>8AO</scope><scope>8BJ</scope><scope>8FK</scope><scope>8FL</scope><scope>ABUWG</scope><scope>AFKRA</scope><scope>ALSLI</scope><scope>AZQEC</scope><scope>BENPR</scope><scope>BEZIV</scope><scope>CCPQU</scope><scope>DHY</scope><scope>DON</scope><scope>DPSOV</scope><scope>DWQXO</scope><scope>FQK</scope><scope>FRNLG</scope><scope>F~G</scope><scope>GNUQQ</scope><scope>JBE</scope><scope>K60</scope><scope>K6~</scope><scope>K8~</scope><scope>KC-</scope><scope>L.-</scope><scope>M0C</scope><scope>M2L</scope><scope>M2R</scope><scope>PQBIZ</scope><scope>PQBZA</scope><scope>PQEST</scope><scope>PQQKQ</scope><scope>PQUKI</scope><scope>Q9U</scope><scope>S0X</scope><orcidid>https://orcid.org/0000-0002-1768-9946</orcidid></search><sort><creationdate>20201201</creationdate><title>Economic Regulation in the Consumer Loans Market</title><author>Mori, Nobuhiro ; 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The nonbanks supply funds to consumers in the consumer loans market. An inverse demand function of the consumer is linear. The downstream nonbank freely enters the market as long as it earns a positive profit. First, this paper derives free-entry equilibrium without government regulation. Next, this paper examines the effects of government regulation on the entry of nonbanks. Two regulatory schemes are investigated: partial regulation, wherein the government can only control the interest rate the monopolist sets, and full regulation, wherein the government can control the number of nonbanks as well as the interest rate. This paper presents four new results. First, downstream firms insufficiently enter the market under partial regulation. Second, downstream firms excessively enter the market under full regulation. Third, the establishment of the upstream public firm improves welfare even though its profit is negative under partial regulation. Fourth, full regulation is welfare improving compared to partial regulation.</abstract><cop>New York</cop><pub>Springer US</pub><doi>10.1007/s11293-020-09685-z</doi><tpages>13</tpages><orcidid>https://orcid.org/0000-0002-1768-9946</orcidid></addata></record> |
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| subjects | Consumers Economics Economics and Finance Interest rates International Economics Loans Macroeconomics/Monetary Economics//Financial Economics Markets Microeconomics Monopolies Public Finance Regulation Welfare |
| title | Economic Regulation in the Consumer Loans Market |
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