The Size of Credit Bureaus with Multiple Lenders

摘要

This paper explains the incomplete nature of shared information across many countries. In our two period model of adverse selection, the credit bureau shares default information to detect low ability borrowers. We identify the equilibrium quantity of shared information under two different ownership structures: lender-owned consortiums vs. independent agency. In the first case, the consortium members exchange information to conclude more accurate credit decisions. We firnd that lenders joining the consortium will not add enough information to make up for their profirt share in the bureau: thus, existing members may block the entry into the consortium before it covers all lenders. By endogenizing high type borrowers' decision to sign multiple loan contracts, we show that as more contracts are signed, the consortium size grows alleviating adverse selection and lowering interest rates. The independent agency, however, acquires information from the members, but sells information to non-members as well, albeit at a higher cost. Due to decreasing marginal information, it may not want to expand too much and too many discounts, while the members are willing to provide their information to make use of the lower cost. We show, however, that this type of arrangement provides full information sharing.