Browsing by Author "Tzavellas, Hector"

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    Deposit Competition, Interbank Market, and Bank Profit
    Jiang, Bo; Tzavellas, Hector; Yang, Xiaoying (MDPI, 2022-04-20)
    In this paper, we study how the interbank market could impact deposit competition and bank profits. We first document two stylized facts: the net interbank funding ratio is negatively correlated with net interest margin (NIM), as well as with the cost-to-income ratio (CIR). To rationalize these two facts, we embed the interbank market into a BLP model framework. The model is calibrated using Chinese listed banks’ data. A counterfactual experiment reveals that shutting down the interbank market will lead to a decline in NIM and bank profits. Our results indicate that the interbank market can facilitate specialization and reduce the intensity of deposit competition.
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    Three papers on belief updating and its applications
    Chan, Chao Hung (Virginia Tech, 2024-05-23)
    The normative foundation (axioms) of Bayesian belief updating has long been established in the literature of decision science. However, psychology and experiments suggest that while rational decision making is ideal, it is rarely achievable for ordinary people. Therefore, it is important to explore the foundations and consequences of rational decision making within the field of economics. This thesis involves three papers on this. In the first paper, I explore the consequences of wishful thinking on mechanism design. It suggests that wishful thinking bias could be profit-generating for mechanism designers. In the second paper, I investigate conservative updating and provide a foundation for it. The main behavioral axiom, ``conservative consistency," suggests that decision-makers may partially incorporate information, particularly when it requires them to revise their previous preferences (the preferences order according to their prior belief). In the third paper, I reframe the model selection problem as a rational decision-making problem. The decision-maker is restricted to choosing an advisor to delegate their choices. I explore the conditions under which a rational decision-maker selects models (or advisors) according to Bayes factor criteria.