Abstract
In this paper we study a horizontally differentiated market for financial intermediation and develop a simple explanation for concentration in the financial intermediation industry. We show that under asymmetric information, if the demand for funds is not perfectly elastic, the heterogeneity of entrepreneurs in need of financing translates into a barrier to entry. That is, we do not need to resort to learning, weak property rights or exogenous costs of entry to generate this result.
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Hyytinen, A., Toivanen, O. Asymmetric Information and the Market Structure of the Venture Capital Industry. Journal of Financial Services Research 23, 241–249 (2003). https://doi.org/10.1023/A:1024623729622
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DOI: https://doi.org/10.1023/A:1024623729622