Information sharing and lending market competition under strong adverse selection

Jorge Fernández-Ruiz, Miguel García-Cestona

Research output: Contribution to journalArticleResearchpeer-review

Abstract

In a relatively recent paper, Gehrig and Stenbacka (Eur Econ Rev 51, 77-99, 2007) show that information sharing increases banks' profits to the detriment of creditworthy entrepreneurs in a model of a banking duopoly with switching costs and poaching. They restrict their analysis to the case in which adverse selection is not too strong. We analyze the complementary case and show that, when the economy suffers from strong adverse selection, information sharing still increases banks' profits, but it may or may not hurt talented entrepreneurs. © 2012 The Author(s).
Original languageEnglish
Pages (from-to)235-245
JournalSERIEs
Volume4
Issue number2
DOIs
Publication statusPublished - 1 Jan 2013

Keywords

  • Equilibrium switching
  • Information sharing
  • Lending relationships
  • Poaching

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