Citation

Discussion Paper Details

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Title: Information Sharing in Banking: A Collusive Device?

Author(s): Thomas Gehrig and Rune Stenbacka

Publication Date: August 2001

Keyword(s): collusion, imperfectly competitive credit markets and information sharing

Programme Area(s): Financial Economics and Industrial Organization

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 emphasising 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.

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Bibliographic Reference

Gehrig, T and Stenbacka, R. 2001. 'Information Sharing in Banking: A Collusive Device?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2911