Economics of Voluntary Information Sharing

60 Pages Posted: 14 Nov 2017 Last revised: 21 Sep 2018

See all articles by Jose Maria Liberti

Jose Maria Liberti

Northwestern University - Kellogg School of Management; DePaul University

Jason Sturgess

Queen Mary University of London

Andrew Sutherland

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: August 31, 2018

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, fintech, specialization, financial intermediation, collateral, credit bureaus, credit scores

JEL Classification: G21, G32

Suggested Citation

Liberti, Jose Maria and Sturgess, Jason and Sutherland, Andrew, Economics of Voluntary Information Sharing (August 31, 2018). Available at SSRN: https://ssrn.com/abstract=3068461 or http://dx.doi.org/10.2139/ssrn.3068461

Jose Maria Liberti (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Jacobs 4203
Evanston, IL 60208
United States
(847) 491-5861 (Phone)
(847) 491-5719 (Fax)

HOME PAGE: http://www.kellogg.northwestern.edu/faculty/directory/liberti_jose.aspx

DePaul University ( email )

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States
(312) 362-8739 (Phone)
(312) 362-6566 (Fax)

Jason Sturgess

Queen Mary University of London ( email )

Mile End Rd
Mile End Road
London, London E1 4NS
United Kingdom

Andrew Sutherland

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street

Register to save articles to
your library

Register

Paper statistics

Downloads
443
Abstract Views
2,025
rank
63,467
PlumX Metrics