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Reserve requirements and double Bertrand competition among banks

By Linda Toolsema


The paper considers a model of double Bertrand competition among banks, in which banks compete for deposits as well as loans. It is shown that the introduction of reserve requirements can have an effect on the existence and efficiency properties of Nash equilibria of this model. This provides a new rationale for imposing reserve requirements on banks.

DOI identifier: 10.1080/135048501750157404
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