Softening Competition by Enhancing Entry: An Example from the Banking Industry
AbstractWe 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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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 85.
Date of creation: 01 Sep 2002
Date of revision:
Publication status: Published in Journal of Industrial Economics, 2003, vol. 54, pages 27-52
barriers to entry; asymmetric information; switching costs; banking competition;
Other versions of this item:
- Bouckaert, J.M.C. & Degryse, H.A., 2002. "Softening Competition by Enhancing entry: An Example from the Banking Industry," Discussion Paper 2002-86, Tilburg University, Center for Economic Research.
- Jan Bouckaert & Hans Degryse, 2002. "Softening Competition by Enhancing Entry: An Example from the Banking Industry," CESifo Working Paper Series 782, CESifo Group Munich.
- 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; Micro Finance 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)
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