Competition vs. Stability: Oligopolistic Banking System with Run Risk

This paper develops a model where large financial intermediaries subject to systemic runs internalize the effect of their leverage on aggregate risk, returns and asset prices. Near steady-state, they restrict avoid risk run which gives rise an accelerator effect. For adverse shocks, system enters zone with high possibly runs. The length time remains in this depends degree concentration through franchise value, price-drop recapitalization channels. speed entry new banks after collapse has stabilizing