Abstract
In a relatively recent paper, Gehrig and Stenbacka (Eur Econ Rev 51, 77–99, 2007) show that information sharing increases banks’ profits to the detriment of creditworthy entrepreneurs in a model of a banking duopoly with switching costs and poaching. They restrict their analysis to the case in which adverse selection is not too strong. We analyze the complementary case and show that, when the economy suffers from strong adverse selection, information sharing still increases banks’ profits, but it may or may not hurt talented entrepreneurs.
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Gehrig T, Stenbacka R (2007) Information sharing and lending market competition with switching costs and poaching. Eur Econ Rev 51: 77–99
Acknowledgments
We thank two anonymous referees and the coeditor María Ángeles de Frutos for very valuable comments. Financial support from the SpanishMinistry of Education and Science, SEJ2007- 67895-CO4-02 and ECO2010-21393-C04-01, is gratefully acknowledged.
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Open Access This article is distributed under the terms of the Creative Commons Attribution 2.0 International License (https://creativecommons.org/licenses/by/2.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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Fernández-Ruiz, J., García-Cestona, M. Information sharing and lending market competition under strong adverse selection. SERIEs 4, 235–245 (2013). https://doi.org/10.1007/s13209-012-0090-y
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DOI: https://doi.org/10.1007/s13209-012-0090-y