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α: calibrated so average coauthorship-adjusted count equals average raw count
We study how competition between asymmetrically informed banks, one specialized and one nonspecialized, affects loan prices. Both banks possess “general” signals regarding the borrower’s quality, which they use to screen loans. The specialized bank also has access to a “specialized” signal on which it bases its loan pricing. This private information-based pricing makes the specialized bank bid more aggressively, mitigating the informational rent effect that gives it monopolistic power. Our findings explain why loans from specialized lenders feature lower interest rates and better ex post performance. Supporting empirical evidence emphasizes the role of specialized information in shaping credit market outcomes.