The Emergence of Information Sharing in Credit Markets
University of Zurich, IEER Working Paper No. 317
48 Pages Posted: 9 Aug 2006 Last revised: 29 May 2013
Date Written: December 1, 2008
We provide the first systematic empirical analysis of how asymmetric information and competition in the credit market affect voluntary information sharing between lenders. We study an experimental credit market in which information sharing can help lenders to distinguish good borrowers from bad ones. Lenders may, however, also lose market power by sharing information with competitors. Our results suggest that asymmetric information in the credit market increases the frequency of information sharing between lenders significantly. Stronger competition between lenders reduces information sharing. In credit markets where lenders may fail to coordinate on sharing information, the degree of information asymmetry, rather than lender competition, drives actual information sharing behavior.
Keywords: Credit Market, Information Sharing, Experiment
JEL Classification: G21, G28, D82, C91
Suggested Citation: Suggested Citation