Softening Competition by Enhancing Entry: An Example from the Banking Industry

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Softening Competition by Enhancing Entry: An Example from the Banking Industry

Author Info

Jan Bouckaert () (University of Antwerp, Department of Economics)
Hans Degryse () (Katholieke Universiteit Leuven and CentER for Economic Research)

Additional information is available for the following registered author(s):

Hans Degryse

Abstract

We show that competing firms relax overall competition by lowering future barriers to entry. We illustrate our findings in a two-period model with adverse selection where banks strategically commit to disclose borrower information. By doing this, they invite rivals to enter their market. Disclosure of borrower information increases an entrant's second-period profits. This dampens competition for serving the first-period market.

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Publisher Info
Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 85.

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Date of creation: 01 Sep 2002
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Publication status: Published in Journal of Industrial Economics, 2003, vol. 54, pages 27-52
Handle: RePEc:sef:csefwp:85

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Paper
- 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!]
- Bouckaert, Jan & Degryse Hans, 2002. "Softening Competition by Enhancing Entry: An Example from the Banking Industry," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

This paper has been announced in the following NEP Reports:

NEP-ALL-2002-12-02 (All new papers)
NEP-CFN-2002-12-02 (Corporate Finance)
NEP-COM-2002-12-02 (Industrial Competition)

References listed on IDEAS
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Tullio Jappelli & Marco Pagano, 2000. "Information Sharing in Credit Markets: A Survey," CSEF Working Papers 36, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
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Other versions:
- Gehrig, Thomas & Stenbacka, Rune, 2001. "Information Sharing in Banking: A Collusive Device?," CEPR Discussion Papers 2911, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Other versions:
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Other versions:
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Other versions:
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Other versions:
- A. Jorge Padilla & Marco Pagano, 1999. "Sharing Default Information as a Borrower Discipline Device," CSEF Working Papers 21, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
- 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, 53--56 Great Sutton Street, London EC1V 0DG.
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Other versions:
- Jan Bouckaert & Hans Degryse, 2002. "Entry and Strategic Information Display in Credit Markets," CSEF Working Papers 79, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
von Thadden, Ernst-Ludwig, 2004. "Asymmetric information, bank lending and implicit contracts: the winner's curse," Finance Research Letters, Elsevier, vol. 1(1), pages 11-23, March. [Downloadable!] (restricted)
Other versions:
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Xavier Vives, 2001. "Competition in the Changing World of Banking," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 535-547.
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