Report

Financial intermediary-coalitions

Abstract: This paper studies an environment in which the investment opportunities of agents are private information and shows that financial intermediaries arise endogenously within that environment. It establishes that financial intermediaries are part of an efficient arrangement in the sense that they are needed to support the authors? private information core allocations. These intermediaries, which are coalitions of agents, exhibit the following characteristics in equilibrium: they borrow from and lend to large groups of agents; they produce information about investment projects; and they issue claims that have different state contingent payoffs than claims issued by ultimate borrowers.

Status: Published in Journal of Economic Theory (Vol.38, n.2, April 1986, pp.211-232)

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Staff Report

Publication Date: 1985

Number: 87