Information Sharing in Banking: A Collusive Device?

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Title: Information Sharing in Banking: A Collusive Device?
Author: Gehrig, Thomas; Stenbacka, Rune
Contributor: Swedish School of Economics and Business Administration, Department of Economics, Economics
Belongs to series: Working Papers - 429
ISSN: 0357-4598
ISBN: 951-555-648-1
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 asymmetries between banks in future lending. Hence, information sharing tends to increase the intensity of competition in future periods and, thus, reduces 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 would be strictly welfare-enhancing.
Date: 2000
Subject: information sharing
imperfectly competitive credit markets
Rights: This publication is copyrighted. You may download, display and print it for Your own personal use. Commercial use is prohibited.

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