Entry and Strategic Information Display in Credit Markets*


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     We are grateful to two anonymous referees and an editor for very useful suggestions. We thank Kris Boschmans, Giovanni Dell'Ariccia, Martin Dufwenberg, Jürgen Eichberger, Hans Gersbach, Steven Ongena, Marco Pagano, Dimitri Paolini, Bruno Parigi, Jean-Charles Rochet, Johan Stennek, Oren Sussman, Frank Verboven, Xavier Wauthy and, especially, Carmen Matutes for stimulating comments. We also acknowledge input from seminar participants at the CORE/IRES workshop on Industrial Organisation, the EEA conference in Lausanne, the ESEM conference in Venice, Antwerp, Bern, CentER, CSEF-Salerno, Ghent, Heidelberg, IUI (Stockholm), Leuven, and the Finance and Consumption Workshop in Florence. Financial assistance from FWO-Flanders (G.0442.05), the Research Council of the University of Leuven, the Netherlands Organisation for Scientific Research (NWO), and the TMR Network on the Industrial Organisation of Banking and Financial Markets is gratefully appreciated.


In many countries, lenders voluntarily provide information about their borrowers to private credit registries. A recent World Bank survey reveals that the display of a lender's own borrower information is often not reciprocated. That is, access to these registries does not require the prior provision of proprietary data. We argue that incumbent lenders release information about a portion of their profitable borrowers for strategic reasons. The reasoning is that the pool of unreleased borrowers becomes characterised by a severe adverse selection problem. This prevents the entrants from bidding for all the incumbent's profitable borrowers and reduces their scale of entry.