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Information Sharing in Banking: A Collusive Device?

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  • Thomas Gehrig

    (University of Freiburg)

  • Rune Stenbacka

    (Swedish School of Economics)

Abstract

We show that information sharing among banks may serve as a collusive device. An informational sharing agreement is an a-priori commitment to reduce informational asymmetry between banks in future lending. Hence, information sharing agreements tend to increase the intensity of competition in future periods and, thus, reduce the value of informational rents in current competition. We contribute to the existing literature by emphasizing that a reduction in informational rents will also reduce the intensity of competition in the current period, thereby reducing competitive pressure in current credit markets. We provide a large class of economic environments, where a ban on information sharing is strictly preferred by society.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1837.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1837

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References

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  1. Jappelli, Tullio & Pagano, Marco, 1991. "Information Sharing in Credit Markets," CEPR Discussion Papers 579, C.E.P.R. Discussion Papers.
  2. Petersen, Mitchell A & Rajan, Raghuram G, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 407-43, May.
  3. Raith, Michael, 1996. "A General Model of Information Sharing in Oligopoly," Journal of Economic Theory, Elsevier, vol. 71(1), pages 260-288, October.
  4. Jappelli, Tullio & Pagano, Marco, 1999. "Information Sharing, Lending and Defaults: Cross-Country Evidence," CEPR Discussion Papers 2184, C.E.P.R. Discussion Papers.
  5. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-43, March.
  6. A Jorge Padilla & Marco Pagano, 1994. "Sharing Default Information as a Borrower Discipline Device," CEPR Financial Markets Paper 0043, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ.
  7. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
  8. Gal-Or, Esther, 1986. "Information Transmission-Cournot and Bertrand Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 85-92, January.
  9. Paul Klemperer, 1987. "The Competitiveness of Markets with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 138-150, Spring.
  10. Klemperer, Paul, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 375-94, May.
  11. Shapiro, Carl, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 433-46, July.
  12. Padilla, A Jorge & Pagano, Marco, 1997. "Endogenous Communication among Lenders and Entrepreneurial Incentives," Review of Financial Studies, Society for Financial Studies, vol. 10(1), pages 205-36.
  13. Kai-Uwe Kühn, 2001. "Fighting collusion by regulating communication between firms," Economic Policy, CEPR & CES & MSH, vol. 16(32), pages 167-204, 04.
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Citations

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Cited by:
  1. Giannetti, Caterina & Jentzsch, Nicola & Spagnolo, Giancarlo, 2010. "Information Sharing and Cross-Border Entry in European Banking," ECRI Papers 2990, Centre for European Policy Studies.
  2. Tlili, Rim, 2012. "Comment justifier la multibancarité au sein des PME ?," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/10919, Université Paris-Dauphine.
  3. Hyytinen, Ari, 2001. "Information Production, Banking Competition and the Market Structure of the Banking Industry," Discussion Papers 749, The Research Institute of the Finnish Economy.
  4. Tassel, Eric Van, 2006. "Relationship lending under asymmetric information: A case of blocked entry," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 915-929, September.
  5. Djedidi-Kooli, Salima, 2009. "L’accès au financement des PME en France : quel rôle joué par la structure du système bancaire ?," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/8354, Université Paris-Dauphine.
  6. Bouckaert, B & Degryse, Hans, 2002. "Softening competition by enhancing entry: An example from the banking industry," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/118582, Katholieke Universiteit Leuven.
  7. Degryse, Hans & Bouckaert, B, 2001. "Borrower poaching and information display in credit markets," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/103656, Katholieke Universiteit Leuven.
  8. Hyytinen, Ari, 2003. "Information production and lending market competition," Journal of Economics and Business, Elsevier, vol. 55(3), pages 233-253.
  9. Thomas Gehrig & Rune Stenbacka, 2003. "Venture Cycles: Theory and Evidence," CESifo Working Paper Series 882, CESifo Group Munich.
  10. Udo Broll & Thilo Pausch & Peter Welzel, 2002. "Credit Risk and Credit Derivatives in Banking," Discussion Paper Series 228, Universitaet Augsburg, Institute for Economics.
  11. Gehrig, Thomas & Stenbacka, Rune, 2002. "Introductory Offers in a Model of Strategic Competition," CEPR Discussion Papers 3189, C.E.P.R. Discussion Papers.
  12. Gehrig, Thomas & Stenbacka, Rune, 2007. "Information sharing and lending market competition with switching costs and poaching," European Economic Review, Elsevier, vol. 51(1), pages 77-99, January.
  13. Gehrig, Thomas & Stenbacka, Rune, 2001. "Screening Cycles," CEPR Discussion Papers 2915, C.E.P.R. Discussion Papers.

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