Monopolistic Pricing in the Banking Industry: a Dynamic Model



We split the right-end side in different pieces, to begin with net worth.

(1 - q) [yYβ - [1 - (1 - q)«]]

Yy β

Yy


« (1 - q )


+1


βγγ + [(1 - q )«


1]


(1 - q ) [yY β - [1 - (1 - q ) «


NW +


« (1 - q )


NW


(74)


The value of Zt is:


[1 - γγ ] γγ - 1] NW

Yy β


(1 - q){yYβ - [1 - (1 - q)«]}

Yy β


Yy              1 - (1 - q ) «


1 - «(1 - q) (1 - q) [yYβ - [1 - (1 - q)«]]


⅛]


Zt +


,__1 - (1 - q )«_________E [1 z ]

(1 - q)[yYβ - [1 - (1 - q)«]]   -α t+1-∣


-1E [1 ] Zt + 1   (1 q ) « E [1 Zt].

β L a J          γγ β      L α J


The value of Xt is:


(1 - q) [yYβ - [1 - (1 - q)«]]
Yy β

_    Yy__Yy β______χ +

1 - «(1 - q) [yYβ - [1 - (1 - q)«]] t-1

I γγβ V, I 1 V. —

[yYβ - [1 - (1 - q)«]]       1 - «(1 - q)


(1 - q)( Yy β - 1)
Yy β


Xt +


(1 - q ) Yy ( D

1 - «(1 - q)( t


The final result is the following:

e[Ft+i] - [—- + γγ] Ft + -Ft~ι =
Lγγβ     J β


[1 - Yy ] [βYγ - 1]


-1E[ 1] Zt + 1 - (1 - q>« E[t Zt +1] + (1 - q)(γγβ - 1> Xt +
β L α J         γγ β      La J         γγ β


Yy β

(1 - q ) Yy

[1 - «(1 - q)]


NW +


(eD - et ).


(75)


Alternative solution of the system


E [ Ft] =


1 - (1 - q)*    , (1 - q) [yYβ - [1 - (1 - q)«]] ,

γγ β   -t +---------Yββ---------Dt +


+βγγ + [(1 - q ) «
Yy β


1 NW + (1 - q) Xt + 1 (1  q) « E [1 Zt +1].

Yy β      La J


(76)


25




More intriguing information

1. Prizes and Patents: Using Market Signals to Provide Incentives for Innovations
2. An Efficient Circulant MIMO Equalizer for CDMA Downlink: Algorithm and VLSI Architecture
3. Surveying the welfare state: challenges, policy development and causes of resilience
4. The name is absent
5. Opciones de política económica en el Perú 2011-2015
6. Climate change, mitigation and adaptation: the case of the Murray–Darling Basin in Australia
7. Inflation and Inflation Uncertainty in the Euro Area
8. The name is absent
9. Credit Market Competition and Capital Regulation
10. Macro-regional evaluation of the Structural Funds using the HERMIN modelling framework