Conflicts of Interest and Credible Information Provision by Specialized and One-Stop Banks
27 Pages Posted: 21 Jul 2003
Date Written: February 28, 2003
This paper is concerned with the general question of the provision of information by financial intermediaries to their customers. Specifically, it analyses the different ways the market can be organized and its effects on pricing and the level of information investors obtain. We find that market structure depends on the reputation costs, switching costs for customers, and the existence of market power. This provides a new justification for the presence of one-stop banks. In addition, we find that information access such as the internet may promote integration.
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