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Why do (or do not) banks share customer information? A comparison of mature private credit markets and markets in transition

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  • Iván Major

    () (Institute of Economics, Hungarian Academy of Sciences)

Abstract

Credit bureaus administering information sharing among lenders about customers reduce information asymmetry and should be key to modern credit markets. In contrast to former studies, we show that willingness to share information depends more on institutions and market concentration than on demand or other market characteristics such as, regional diversity or local monopolies. We show using infinite period models with strategic behavior that lenders' interest to share information depends on market concentration and the type of information sharing arrangement. Sharing bad information only is the dominant strategy if banks think long-term. If banks are myopic no information sharing may occur.

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Bibliographic Info

Paper provided by Institute of Economics, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0603.

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Date of creation: 24 Apr 2006
Date of revision: 24 Apr 2006
Handle: RePEc:has:discpr:0603

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Keywords: Organisational Behaviour; Transaction Costs; Criteria for Decision-Making under Risk and Uncertainty; Asymmetric and Private Information; Intertemporal Firm Choice and Growth; Investment; or Financing; Banks; Other Depository Institutions; Mortgages;

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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. Kata Bognar & Lones Smith, 2004. "We Can't Argue Forever," IEHAS Discussion Papers 0415, Institute of Economics, Hungarian Academy of Sciences.
  3. Xavier Vives, 2002. "Private Information, Strategic Behavior, and Efficiency in Cournot Markets," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 361-376, Autumn.
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  7. Berthold Herrendorf & Akos Valentinyi, 2005. "Which Sectors Make the Poor Countries so Unproductive?," IEHAS Discussion Papers 0519, Institute of Economics, Hungarian Academy of Sciences.
  8. William Novshek & Hugo Sonnenschein, 1982. "Fulfilled Expectations Cournot Duopoly with Information Acquisition and Release," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 214-218, Spring.
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  10. Péter Kondor, 2005. "The more we know, the less we agree: public announcements and higher-order expectations," FMG Discussion Papers dp532, Financial Markets Group.
  11. Susan Athey & Kyle Bagwell, 1999. "Optimal Collusion with Private Information," Working papers 99-17, Massachusetts Institute of Technology (MIT), Department of Economics.
  12. Richard N. Clarke, 1983. "Collusion and the Incentives for Information Sharing," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 383-394, Autumn.
  13. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  14. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Anders Frederiksen & Elod Takats, 2004. "Optimal incentive mix of performance pay and efficiency wage," IEHAS Discussion Papers 0418, Institute of Economics, Hungarian Academy of Sciences.
  16. Lode Li, 1985. "Cournot Oligopoly with Information Sharing," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 521-536, Winter.
  17. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-43, March.
  18. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  19. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
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