Competition and Financial Intermediaries
We now have a better understanding of how financial markets work. We should also recognize that competition within these markets encourages suppliers of financial goods to discover better ways of making their customers happy. An important way in which markets encourage people to organize financial services is through the creation of financial intermediaries like commercial and investment banks, insurance companies, and pension funds. In competitive settings, financial intermediaries face incentives to find better, cheaper ways of providing credit and liquidity, developing insurance plans, and offering various kinds of investment opportunities, for example, pension plans. Competition between stock ...
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