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Information Sharing in Banking: A Collusive Device?

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Author Info
Thomas Gehrig (University of Freiburg)
Rune Stenbacka (Swedish School of Economics)

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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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File URL: http://fmwww.bc.edu/RePEc/es2000/1837.pdf
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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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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Blackwell Publishing, vol. 62(4), pages 515-39, October. [Downloadable!] (restricted)
  2. Padilla, A Jorge & Pagano, Marco, 1997. "Endogenous Communication among Lenders and Entrepreneurial Incentives," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 10(1), pages 205-36.
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  3. Tullio Jappelli & Marco Pagano, 1999. "Information Sharing, Lending and Defaults: Cross-Country Evidence," CSEF Working Papers 22, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
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  4. Gal-Or, Esther, 1986. "Information Transmission-Cournot and Bertrand Equilibria," Review of Economic Studies, Blackwell Publishing, vol. 53(1), pages 85-92, January. [Downloadable!] (restricted)
  5. Pagano, Marco & Jappelli, Tullio, 1993. " Information Sharing in Credit Markets," Journal of Finance, American Finance Association, vol. 48(5), pages 1693-1718, December. [Downloadable!] (restricted)
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  6. 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. [Downloadable!] (restricted)
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  7. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-43, March. [Downloadable!] (restricted)
  8. Paul Klemperer, 1987. "The Competitiveness of Markets with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 138-150, Spring. [Downloadable!] (restricted)
  9. Klemperer, Paul, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 375-94, May. [Downloadable!] (restricted)
  10. Raith, Michael, 1996. "A General Model of Information Sharing in Oligopoly," Journal of Economic Theory, Elsevier, vol. 71(1), pages 260-288, October. [Downloadable!] (restricted)
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  11. Kai-Uwe Kühn, 2001. "Fighting collusion by regulating communication between firms," Economic Policy, CEPR, CES, MSH, vol. 16(32), pages 167-204, 04. [Downloadable!] (restricted)
  12. Padilla, A. Jorge & Pagano, Marco, 2000. "Sharing default information as a borrower discipline device," European Economic Review, Elsevier, vol. 44(10), pages 1951-1980, December. [Downloadable!] (restricted)
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  13. Shapiro, Carl, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Blackwell Publishing, vol. 53(3), pages 433-46, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bouckaert, J. & Degryse, H., 2002. "Softening competition by enhancing entry: : an example from the banking industry," Discussion Paper 86, Tilburg University, Center for Economic Research. [Downloadable!]
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  2. Udo Broll & Thilo Pausch & Peter Welzel, 2002. "Credit Risk and Credit Derivatives in Banking," Discussion Paper Series 228, Universitaet Augsburg, Institute for Economics. [Downloadable!]
  3. Gehrig, Thomas & Stenbacka, Rune, 2002. "Introductory Offers in a Model of Strategic Competition," CEPR Discussion Papers 3189, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Ari Hyytinen, 2001. "Information Production, Banking Competition and the Market Structure of the Banking Industry," Discussion Papers 749, The Research Institute of the Finnish Economy. [Downloadable!]
  5. Bouckaert, J. & Degryse, H., 2001. "Borrower poaching and information display in credit markets," Discussion Paper 41, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  6. Gehrig, Thomas & Stenbacka, Rune, 2001. "Screening Cycles," CEPR Discussion Papers 2915, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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