Prices Return
Prices Return
This chapter considers the transition to a new equilibrium in 1899 by reviewing some economics literature that deals with three different issues that arise in the transition from a single-price equilibrium to a range of prices. The first suggests that when there is substantial asymmetric information, price competition in credit markets may be reduced, if not eliminated, in favor of credit rationing. Next, the chapter studies why the equilibrium in a credit rationing market may feature a single interest rate. Finally, it examines a third approach that analyzes conditions under which such pooling equilibria may unravel. This economics literature helps shed light on the transition from the near universal five-percent interest rate equilibrium to a regime with a distribution of rates in the late nineteenth century.
Keywords: economics literature, single-price equilibrium, price ranges, price competition, credit markets, credit rationing
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