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Economics of Voluntary Information Sharing

José Liberti, Jason Sturgess and Andrew Sutherland ()
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José Liberti: DePaul University and Northwestern University
Jason Sturgess: Queen Mary University of London

No 869, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: We show that lenders join a U.S. commercial credit bureau when information asymmetries between incumbents and entrants create an adverse selection problem that hinders market entry. Lenders also delay joining when information asymmetries protect them from competition in existing markets, consistent with lenders trading off new market entry against heightened competition. We exploit shocks to information coverage to show that lenders enter new markets after joining the bureau in a pattern consistent with this trade-off. Our results illuminate why intermediaries voluntarily share information and show how financial technology that mitigates information asymmetries can shape the boundaries of lending.

Keywords: information sharing; adverse selection; specialization; financial intermediation; collateral; credit bureaus; fintech (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2018-09-30
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