Softening Competition by Enhancing Entry: An Example from the Banking Industry

Jan Bouckaert and Hans Degryse

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We show that competing firms relax overall competition by lowering future barriers to entry. We illustrate our findings in a two-period model with adverse selection where banks strategically commit to disclose borrower information. By doing this, they invite rivals to enter their market. Disclosure of borrower information increases an entrant's second-period profits. This dampens competition for serving the first-period market.

Keywords: barriers to entry; asymmetric information; switching costs; banking competition (search for similar items in EconPapers)
JEL-codes: D43 G21 L13 (search for similar items in EconPapers)
Date: 2002-09-01
New Economics Papers: this item is included in nep-cfn and nep-com
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Citations: View citations in EconPapers (1)

Published in Journal of Industrial Economics, 2003, vol. 54, pages 27-52

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Working Paper: Softening Competition by Enhancing Entry: An Example from the Banking Industry (2002)
Working Paper: Softening Competition by Enhancing entry: An Example from the Banking Industry (2002)
Working Paper: Softening Competition by Enhancing entry: An Example from the Banking Industry (2002)
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