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The Emergence of Information Sharing in Credit Markets

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  • Martin Brown
  • Christian Zehnder

Abstract

We examine how asymmetric information and competition in the credit market affect voluntary information sharing between lenders. We study an experimental credit market in which information sharing can help lenders to distinguish good borrowers from bad ones, ecause borrowers may exogenously switch locations. Lenders are, however, engaged in spatial competition, and thus may lose market power by sharing information with competitors. Our results suggest that asymmetric information in the credit market increases the frequency of information sharing between lenders significantly. Competition between lenders reduces information sharing, but the impact of competition seems to be only of second order importance.

Suggested Citation

  • Martin Brown & Christian Zehnder, 2008. "The Emergence of Information Sharing in Credit Markets," Working Papers 2008-01, Swiss National Bank.
    • Handle: RePEc:snb:snbwpa:2008-01
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    References listed on IDEAS

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    More about this item

    Keywords

    information sharing; credit; competition; asymmetric information;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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