SSRN-Information Sharing in Banking: A Collusive Device? by Thomas Gehrig, Rune Stenbacka

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Information Sharing in Banking: A Collusive Device?

THOMAS GEHRIG
University of Freiburg; Centre for Economic Policy Research (CEPR)
RUNE STENBACKA
Swedish School of Economics and Business Administration

August 2001

CEPR Discussion Paper No. 2911

Abstract:
We show that information sharing among banks may serve as a collusive device. An informational sharing agreement is an a-priori commitment to reduce informational asymmetries between banks in future lending. Hence, information sharing tends to increase the intensity of competition in future periods and, thus, reduces the value of informational rents in current competition. We contribute to the existing literature by emphasising that a reduction in informational rents will also reduce the intensity of competition in the current period, thereby reducing competitive pressure in current credit markets. We provide a large class of economic environments, where a ban on information sharing would be strictly welfare enhancing.

Keywords: Information sharing, collusion, imperfectly competitive credit markets

JEL Classifications: D82, G21, L15

Working Paper Series

Abstract has been viewed 547 times

Contact Information for THOMAS GEHRIG (Contact Author)

Email address for THOMAS GEHRIG
University of Freiburg
Platz der Alten Synagoge
D-79085 Freiburg
Germany
+49 761 203 2361 (Phone)
+49 761 203 2375 (Fax)

(No e-mail address available for THOMAS GEHRIG
Centre for Economic Policy Research (CEPR)
90-98 Goswell Road
London EC1V 7RR
United Kingdom

Contact Information for RUNE STENBACKA

Email address for RUNE STENBACKA
Swedish School of Economics and Business Administration
PO Box 479
FI-00101 Helsinki
Finland
+35 89 4313 3433 (Phone)
+35 89 4313 3382 (Fax)

Suggested Citation

Gehrig, Thomas and Stenbacka, Rune, "Information Sharing in Banking: A Collusive Device?" (August 2001). CEPR Discussion Paper No. 2911. http://ssrn.com/abstract=280261

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