The Emergence of Information Sharing in Credit Markets

Martin Brown () and Christian Zehnder ()

No iewwp317, IEW - Working Papers from Institute for Empirical Research in Economics - IEW

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, because borrowers may exogenously switch locations. Lenders, however, are also engaged in spatial competition, and lose market power by sharing information with close competitors. Our results suggest that more asymmetric information in the credit market increases information sharing behavior significantly. Stronger competition between lenders reduces information sharing, but its impact seems to be only of second order importance.

Keywords: Credit Market; Information Sharing; Spatial Competition; Adverse Selection (search for similar items in EconPapers)
JEL-codes: C92 G21 D82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-com, nep-cta, nep-exp, nep-fmk and nep-ure
Date: 2007-04
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Working Paper: The Emergence of Information Sharing in Credit Markets (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:zur:iewwpx:317

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