On financial frictions and firm's market power

There are two opposing welfare effects of market power in a model with monopolistic competition, loan defaults and moral hazard. The loss of output produced if firms set a higher mark-up over marginal costs confronts with some gain due to higher expected profits and the reduction of defaults. Such t...

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Detalles Bibliográficos
Autores: Casares Polo, Miguel, Deidda, Luca, Galdón Sánchez, José Enrique
Tipo de recurso: artículo
Estado:Versión aceptada para publicación
Fecha de publicación:2023
País:España
Institución:Universidad Pública de Navarra
Repositorio:Academica-e. Repositorio Institucional de la Universidad Pública de Navarra
OAI Identifier:oai:academica-e.unavarra.es:2454/45730
Acceso en línea:https://hdl.handle.net/2454/45730
Access Level:acceso abierto
Palabra clave:Credit rationing
Loan defaults
Market power
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spelling On financial frictions and firm's market powerCasares Polo, MiguelDeidda, LucaGaldón Sánchez, José EnriqueCredit rationingLoan defaultsMarket powerThere are two opposing welfare effects of market power in a model with monopolistic competition, loan defaults and moral hazard. The loss of output produced if firms set a higher mark-up over marginal costs confronts with some gain due to higher expected profits and the reduction of defaults. Such tradeoff results in an optimal level of market power that decreases with the efficiency of liquidation following default on a loan. If moral hazard is pervasive, credit rationing cuts down the default rates and mitigates the welfare cost of financial frictions.The authors thank Banco de España for financial support through the project. Política monetaria en economías con fricciones financieras y bancarias. Miguel Casares and Jose E. Galdon-Sanchez also acknowledge financial support from Spanish State Research Agency through project PID2021-127119NB-I00 and by “ERDF A way of making Europe”. Luca G. Deidda also acknowledges the financial support by the Italian Ministero dell’Università (Grant No. 20157NH5TP), Fondazione di Sardegna, Università di Sassari (Una tantum 2019), and RAS (Grant No. RASSR89213).WileyEconomíaEkonomia2023info:eu-repo/semantics/articleinfo:eu-repo/semantics/acceptedVersionapplication/pdfhttps://hdl.handle.net/2454/45730reponame:Academica-e. Repositorio Institucional de la Universidad Pública de Navarrainstname:Universidad Pública de NavarraInglésPlan Estatal de Investigación Científica y Técnica y de Innovación 2021-2023/PID2021-127119NB-I00/ES/ © 2023 Western Economic Association International.info:eu-repo/semantics/openAccessoai:academica-e.unavarra.es:2454/457302026-06-17T12:41:47Z
dc.title.none.fl_str_mv On financial frictions and firm's market power
title On financial frictions and firm's market power
spellingShingle On financial frictions and firm's market power
Casares Polo, Miguel
Credit rationing
Loan defaults
Market power
title_short On financial frictions and firm's market power
title_full On financial frictions and firm's market power
title_fullStr On financial frictions and firm's market power
title_full_unstemmed On financial frictions and firm's market power
title_sort On financial frictions and firm's market power
dc.creator.none.fl_str_mv Casares Polo, Miguel
Deidda, Luca
Galdón Sánchez, José Enrique
author Casares Polo, Miguel
author_facet Casares Polo, Miguel
Deidda, Luca
Galdón Sánchez, José Enrique
author_role author
author2 Deidda, Luca
Galdón Sánchez, José Enrique
author2_role author
author
dc.contributor.none.fl_str_mv Economía
Ekonomia
dc.subject.none.fl_str_mv Credit rationing
Loan defaults
Market power
topic Credit rationing
Loan defaults
Market power
description There are two opposing welfare effects of market power in a model with monopolistic competition, loan defaults and moral hazard. The loss of output produced if firms set a higher mark-up over marginal costs confronts with some gain due to higher expected profits and the reduction of defaults. Such tradeoff results in an optimal level of market power that decreases with the efficiency of liquidation following default on a loan. If moral hazard is pervasive, credit rationing cuts down the default rates and mitigates the welfare cost of financial frictions.
publishDate 2023
dc.date.none.fl_str_mv 2023
dc.type.none.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/acceptedVersion
format article
status_str acceptedVersion
dc.identifier.none.fl_str_mv https://hdl.handle.net/2454/45730
url https://hdl.handle.net/2454/45730
dc.language.none.fl_str_mv Inglés
language_invalid_str_mv Inglés
dc.relation.none.fl_str_mv Plan Estatal de Investigación Científica y Técnica y de Innovación 2021-2023/PID2021-127119NB-I00/ES/
dc.rights.none.fl_str_mv © 2023 Western Economic Association International.
info:eu-repo/semantics/openAccess
rights_invalid_str_mv © 2023 Western Economic Association International.
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Wiley
publisher.none.fl_str_mv Wiley
dc.source.none.fl_str_mv reponame:Academica-e. Repositorio Institucional de la Universidad Pública de Navarra
instname:Universidad Pública de Navarra
instname_str Universidad Pública de Navarra
reponame_str Academica-e. Repositorio Institucional de la Universidad Pública de Navarra
collection Academica-e. Repositorio Institucional de la Universidad Pública de Navarra
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