Information Acquisition Under Uncertainty in Credit Markets

Banerjee, Priyodorshi

doi:10.1093/rfs/hhi024

Cited by 15 publications

(17 citation statements)

References 18 publications

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“…Consequently, in contrast to our model, increasing the value of Poor borrowers always bene…ts lenders. Also in Banerjee (2005), an improvement in a lender's screening accuracy never bene…ts a rival, whereas in our model a rival may bene…t if skimming su¢ ciently moderates 1 They restrict attention to the case when the expected returns from a borrower classi…ed as Poor is negative even at the highest interest rate, whereas the expected returns from a cross-classi…ed borrower is positive.…”

Section: Literature Reviewmentioning

confidence: 74%

“…Closest to our work are Broecker (1990) and Banerjee (2005). Broecker (1990) restricts all lenders to have the same screening accuracy and looks at the impact of imperfect independent screening on competition.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Broecker (1990) restricts all lenders to have the same screening accuracy and looks at the impact of imperfect independent screening on competition. Banerjee (2005) extends this model to allow for lenders to have di¤erent screening accuracies and analyzes their incentives to adopt a superior screening technology. However, given their market context, they assume that Poor borrowers are a priori unpro…table and are always denied credit.…”

Section: Literature Reviewmentioning

confidence: 99%

“…al. (2001), Broecker (1990) andBanerjee (2005) is that imperfectly correlated classi…cations moderate competition. However, we …nd that when one …rm is more cost-e¢ cient than the other, or customers prefer one seller over the other, competition may in fact be more intense as these …rm-level advantages interfere with skimming.…”

Section: Competitionmentioning

confidence: 99%

“…This aspect distinguishes the nature of competitive interaction in our model from that in Broecker (1990) and in Banerjee (2005). Both of these models make the following assumptions.…”

Section: Equilibrium When Both Firms Have Cvmmentioning

confidence: 99%

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Customer Value-Based Management: Competitive Implications

2008

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Many …rms today quantify the value of individual customers and serve them di¤erentially; providing better priviliges, discounts or other inducements to high value customers. We refer to this practice as Customer Value-based Management (CVM). Previous research in this area and popular press recommend numerous prescriptions that are research-based and intuitively sound. However, …rms that have adopted CVM have often met with mixed results. For example, only a third of leading U.S. retail banks indicate that they have gained a competitive advantage from CVM. One possible factor that might account for the di¤erence between actual outcomes and anticipated results could be that real …rms implement CVM in a competitive environment. Our objective is to study CVM explicitly in a competitive setting. Our results suggest that while some recommendations and prescriptions from past research continue to hold in a competitive environment, some others do not. For example, …ring low-value customers decreases …rm pro…ts, and even improving their value may prove counter-productive. Also as the cost of CVM technology decreases, …rms adopting CVM in a competitive environment do not necessarily bene…t. Many …rms today quantify the value of individual customers and serve them di¤eren-tially; providing better privileges, discounts or other inducements to high value customers.We refer to this practice as Customer Value-based Management (CVM). Previous research in this area and popular press o¤er numerous prescriptions that are research-based and intuitively sound. However, …rms that have adopted CVM have often met with mixed results.For example, only a third of leading U.S. retail banks indicate that they have gained a competitive advantage from CVM. One possible factor that might account for the di¤erence between actual outcomes and anticipated results could be that real …rms implement CVM in a competitive environment. Our objective is to study CVM explicitly in a competitive setting. Our results suggest that while some recommendations and prescriptions from past research continue to hold in a competitive environment, some others do not. For example, …ring low-value customers decreases …rm pro…ts, and even improving their value may prove counter-productive. Also as the cost of CVM technology decreases, …rms adopting CVM in a competitive environment do not necessarily bene…t.

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Section: Literature Reviewmentioning

confidence: 74%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Competitionmentioning

confidence: 99%

“…This aspect distinguishes the nature of competitive interaction in our model from that in Broecker (1990) and in Banerjee (2005). Both of these models make the following assumptions.…”

Section: Equilibrium When Both Firms Have Cvmmentioning

confidence: 99%

See 3 more Smart Citations