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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title Asymmetric information and imperfect competition in lending markets
Organization Unit
  • Gregory S. Crawford
  • Nicola Pavanini
  • Fabiano Schivardi
  • English
Institution University of Zurich
Series Name Working paper series / Department of Economics
Number 192
ISSN 1664-7041
Number of Pages 46
Date 2015
Abstract Text We measure the consequences of asymmetric information and imperfect competition in the Italian lending market. We show that banks' optimal price response to an increase in adverse selection varies with competition. Exploiting matched data on loans and defaults, we estimate models of demand for credit, loan use, pricing, and firm default. We find evidence of adverse selection and evaluate its importance. While indeed prices rise in competitive markets and decline in concentrated ones, the former effect dominates, suggesting that while market power can mitigate the adverse effects of asymmetric information, mainstream concerns about its effects survive with imperfect competition.
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Keywords Asymmetric information, imperfect competition, lending markets, Italian banking, adverse selection, Asymmetrische Information, Unvollständige Konkurrenz, Kreditmarkt,