Banks overcome the free-rider problem faced by private information-collection firms in financial markets by
A)charging only for information depositors find useful.
B)charging both depositors and borrowers for information.
C)mainly holding loans which are not traded in financial markets.
D)mainly holding securities which have active secondary markets.

Question

Quizplus · Accepted Answer

Banks primarily hold loans that are not traded in financial markets, which helps them overcome the free-rider problem by making the information they collect about borrowers more exclusive and valuable.

Banks Overcome the Free-Rider Problem Faced by Private Information-Collection Firms