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
Authors:	Bouckaert, Jan ; Degryse, Hans
Publisher:	Munich : Center for Economic Studies and ifo Institute (CESifo)
Subject:	barriers to entry \| asymmetric information \| switching costs \| banking competition.

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Series:	CESifo Working Paper ; 782
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	869748408 [GVK] hdl:10419/75955 [Handle] RePec:ces:ceswps:_782 [RePEc]
Source:	EconStor

Persistent link: https://www.econbiz.de/10010315315