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Signal Jamming in New Credit Markets
- Journal of Money, Credit, and Banking
- The Ohio State University Press
- Volume 34, Number 2, May 2002
- pp. 469-490
- 10.1353/mcb.2002.0050
- Article
- Additional Information
This paper develops a simple two-period model in which a lender's credit operations in a new market end up externalizing information on borrowers' repayment capabilities. This information improves the competitive position of outside lenders by allowing them to enter the credit market with a more accurate description of potential clients. Equilibrium strategies are then identified where an inside lender chooses to offer a costly first-period contract with the explicit objective of distorting the quality of the external information flow in the second period.