Softening Competition by Enhancing Entry: An Example from the Banking Industry

We show that competing firms relax overall competition by lowering future barriers to entry. We illustrate our findings in a two-period model with adverse selection where banks strategically commit to disclose borrower information. By doing this, they invite rivals to enter their market. Disclosure of borrower information increases an entrant's second-period profits. This dampens competition for serving the first-period market.

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Year of publication:	2002-09-01
Authors:	Bouckaert, Jan ; Degryse, Hans
Institutions:	Centro Studi di Economia e Finanza (CSEF)
Subject:	barriers to entry \| asymmetric information \| switching costs \| banking competition

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Extent:	application/pdf
Series:	CSEF Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Published in Journal of Industrial Economics, 2003, vol. 54, pages 27-52
Classification:	D43 - Oligopoly and Other Forms of Market Imperfection ; L13 - Oligopoly and Other Imperfect Markets ; G21 - Banks; Other Depository Institutions; Mortgages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005802037