Information Sharing in Banking: A Collusive Device?

28 Pages Posted: 16 Aug 2001

See all articles by Thomas Gehrig

Thomas Gehrig

University of Vienna

Rune Stenbacka

Hanken School of Economics

Date Written: August 2001

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 Classification: D82, G21, L15

Suggested Citation

Gehrig, Thomas and Stenbacka, Rune, Information Sharing in Banking: A Collusive Device? (August 2001). Available at SSRN: https://ssrn.com/abstract=280261

Thomas Gehrig (Contact Author)

University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

Rune Stenbacka

Hanken School of Economics ( email )

P.O. Box 479
Arkadiankatu 22
Helsinki, Helsinki 00101
Finland

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