Braido, Luis H. B.; da Costa, Carlos EugĂȘnio Ellery Lustosa - Department of Economics, University of Alberta - 2009
We generalize the Boadway and Keen (2006) model of adverse selection in a capital market to allow for risk aversion on the part of entrepreneurs. We show that the Boadway and Keen conclusion-that adverse selection leads to excessive investment-does not necessarily hold when entrepreneurs are...