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| Author: | Anand, B.N. Galetovic, A. |
| Title: | Relationships, competition and the structure of investment banking markets |
| Journal: | Journal of Industrial Economics
2006 : JUN, VOL. 54:2, p. 151-199 |
| Index terms: | competition investment banks market structure |
| Language: | eng |
| Abstract: | Competition can destroy incentives to invest in company-specific relationships. This article examines how the tension between relationships and competition is resolved in the investment banking market, which for decades has been characterized by both relationships and competition. The model studies the impact on relationships of four different dimensions of competition: non-exclusive relationships, competition from arm's-length intermediaries, non-price competition, and endogenous entry. The analysis shows how market equilibrium adjusts so that relationships are sustained in the face of such competition. Banks are shown to establish relationships without either local or aggregate monopoly power. |
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