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This paper characterizes the relationship between entrepreneurial wealth and aggregate investment under adverse selection. Its main finding is that such a relationship need not be monotonic. In particular, three results emerge from the analysis: (i) pooling equilibria, in which investment is...
Persistent link: https://www.econbiz.de/10005827444
We analyze a standard environment of adverse selection in credit markets. In our environment, entrepreneurs who are privately informed about the quality of their projects need to borrow in order to invest. Conventional wisdom says that, in this class of economies, the competitive equilibrium is...
Persistent link: https://www.econbiz.de/10008788752
We analyze a standard environment of adverse selection in credit markets. In our environment, entrepreneurs who are privately informed about the quality of their projects need to borrow from banks. Conventional wisdom says that, in this class of economies, the competitive equilibrium is...
Persistent link: https://www.econbiz.de/10004969343
chances as opposed to those who have not been hired through these intermediaries. A screening approach to the role of those …
Persistent link: https://www.econbiz.de/10005771968
screening, a pure strategy equilibrium exists where banks optimally set interest rates at the same level as their competitors … banks have zero screening costs. In our set up we show that interest rate on loans are largely independent of marginal costs … analysis to the case where banks have differing screening abilities. …
Persistent link: https://www.econbiz.de/10005772155