Showing 1 - 4 of 4
This paper applies options theory to the model of equilibrium credit rationing developed by Stiglitz and Weiss (1981) by noticing that, given a standard debt contract and limited liability, the payoffs to the lender and the borrower when a loan is make involve a put option and a call option...
Persistent link: https://www.econbiz.de/10005730291
Even though self-fulfilling currency attacks lead to multiple equilibria when fundamentals are common knowledge, we demonstrate the uniqueness of equilibrium when speculators face a small amount of noise in their signals about the fundamentals. This unique equilibrium depends not only on the...
Persistent link: https://www.econbiz.de/10005730332
We explore the constrained efficient observational learning model - as when individuals care about successors, or are so induced by an informationlly-constrained social planner. We find that when the herding externality is correctly internalized in this fashion, incorrect herds still obtain. To...
Persistent link: https://www.econbiz.de/10005812252
This paper systematically analyzes and enriches the observational learning paradigm of Banerjee (1992) and Bikhchandani, Hirshleifer, and Welch (1992).
Persistent link: https://www.econbiz.de/10005687576