Softening Competition by Enhancing entry

An Example from the Banking Industry

J.M.C. Bouckaert, H.A. Degryse

Research output: Working paperDiscussion paperOther research output

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Abstract

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.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages32
Volume2002-86
Publication statusPublished - 2002

Publication series

NameCentER Discussion Paper
Volume2002-86

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Banking industry
Adverse selection
Disclosure
Barriers to entry
Profit

Keywords

  • competition
  • banking
  • access to market
  • information

Cite this

Bouckaert, J. M. C., & Degryse, H. A. (2002). Softening Competition by Enhancing entry: An Example from the Banking Industry. (CentER Discussion Paper; Vol. 2002-86). Tilburg: Finance.
Bouckaert, J.M.C. ; Degryse, H.A. / Softening Competition by Enhancing entry : An Example from the Banking Industry. Tilburg : Finance, 2002. (CentER Discussion Paper).
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Bouckaert, JMC & Degryse, HA 2002 'Softening Competition by Enhancing entry: An Example from the Banking Industry' CentER Discussion Paper, vol. 2002-86, Finance, Tilburg.

Softening Competition by Enhancing entry : An Example from the Banking Industry. / Bouckaert, J.M.C.; Degryse, H.A.

Tilburg : Finance, 2002. (CentER Discussion Paper; Vol. 2002-86).

Research output: Working paperDiscussion paperOther research output

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Bouckaert JMC, Degryse HA. Softening Competition by Enhancing entry: An Example from the Banking Industry. Tilburg: Finance. 2002. (CentER Discussion Paper).