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| Author: | Bouckaert, J. Degryse, H. |
| Title: | Softening competition by inducing swithching in credit markets |
| Journal: | Journal of Industrial Economics
2004 : MAR, VOL. 52:1, p. 27-52 |
| Index terms: | Bank lending Competition Credit markets |
| Language: | eng |
| Abstract: | It is shown that competing banks relax overall competition by inducing borrowers to switch lenders. The findings are illustrated in a two-period model with adverse selection where banks strategically commit to disclosing borrower information. By doing this, they invite rivals to poach their first-period market. Disclosure of borrower information increases the rival's second-period profits. This dampens competition for serving the first-period market. |
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