Conclusion

This chapter provides a summary of the book’s main contributions to the theory of credit rationing: This book is the first to show that double-sided Bertrand competition for loans and deposits with market side switching can entail equilibrium credit rationing. Secondly, the book makes the effect of bank equity and its distribution for credit rationing visible. Rich banks offer cheap loans and reject superfluous loan applicants whom poor banks offer expensive loans. Banks realize distinct expected returns on their loans, and expensive banks may enjoy a positive intermediation margin. Thirdly, it is the first book to formally model and analyze the resource allocation process after interest rates have been chosen game-theoretically.