Asymmetric information and the Russian individual savings market

The article considers the influence of informational imperfections on the p erformance of the Russian financial market. The focus is on the individual savings market, which exhibits inefficiencies, including those associated w ith the market power of a dominant agent-Sberbank. Reinforcement of Sberban k's dominance on the market in the period 1994-98 (before the August defaul t combined with financial crisis) is explained as a consequence of asymmetr ic information about the probability of bankruptcy of a new bank. Under asy mmetric information a new private bank has to provide specific quality sign als iii order to attract depositors. Two major lines of inquiry are the cri teria for choosing forms of savings, including that of a bank in which to d eposit money, by Russian citizens, and banks' advertising strategies to con firm the factual risk of default. Within the conceptual framework of a game with separating equilibrium, we analyse the behaviour of the agents on bot h supply and demand sides in the market We find that there is evidence of u sing advertising as a tool of quality signalling at a certain phase of the Russian individual savings market's development.