The Winner’s Curse in Banking
نویسنده
چکیده
Theoretical studies have noted that loan applicants rejected by one bank can apply at another bank, systematically worsening the pool of applicants faced by all banks. This paper presents the first empirical evidence of this effect and explores some additional ramifications, including the role of common filters, such as commercially available credit scoring models, in mitigating this adverse selection, implications for de novo banks, implications for banks’ incentives to comply with fair lending laws, and macroeconomic effects. JEL codes: G2, L1 Sherrill Shaffer Department of Economics and Finance University of Wyoming P.O. Box 3985 Laramie, WY 82071-3985 (307) 766-2173 Fax: (307) 766-5090 e-mail: [email protected] THE WINNER’S CURSE IN BANKING
منابع مشابه
The Loser’s Curse
If the value of a commodity is unknown, a prospective buyer must realize that a bid based on an overestimate of its value is likely to be accepted. In this situation, merely finding out that one’s bid is accepted may cause one to reduce the estimate of a commodity’s value, so winning an auction can bring a feeling of regret. Acceptance of a bid is an informative event, and failure to incorporat...
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