Information-Based Pricing in Specialized Lending

Kristian Blickle, Zhiguo He (), Jing Huang and Cecilia Parlatore

No 32155, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study specialized lending in a credit market competition model with private information. Two banks, equipped with similar data processing systems, possess general signals regarding the borrowers quality; the specialized bank, has access to an additional specialized signal. We study equilibria in which both lenders use general signals to screen loan applications. Conditional on making an offer, the specialized lender prices loans based on its specialized signal. This private-information-based pricing helps explain why loans made by specialized lenders have lower interest rates (lower winning bids) and better ex-post performance (fewer non-performing loans), which we support with robust empirical evidence.

JEL-codes: D43 D44 D82 G21 G23 L10 (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-ban, nep-com, nep-cta and nep-fdg
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Related works:
Working Paper: Information-Based Pricing in Specialized Lending (2024)
Working Paper: Information-Based Pricing in Specialized Lending (2023)
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