Date of this Version
Journal of Economic Theory
Using a theoretical model that incorporates asymmetric information and differing comparative advantages among lenders, this paper analyzes the impact of lender entry on credit access and aggregate net output. The model shows that lender entry has the potential to create a segmented market that increases credit access for those firms targeted by the new lenders but potentially reduces credit access for all other firms. The overall impact on net output depends on the distribution of firms, the relative costs of lenders, and the cost of acquiring information. The model provides new insights into the evidence regarding foreign lenders' entry into emerging markets.
© 2014. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/.
Gormley, T. A. (2014). Costly Information, Entry, and Credit Access. Journal of Economic Theory, 154 633-667. http://dx.doi.org/10.1016/j.jet.2014.06.003
Date Posted: 27 November 2017
This document has been peer reviewed.