This paper discusses the relationship between firms' access to credit market and business fluctuations in a sequential Neo-Austrian economy. Existence of cycles reflects a fundamental distortion in the intertemporal structure of production, that is a lack of coordination between utilization of...

We study competition in capital markets subject to moral hazard when investors cannot prevent side trading. Perfect competition is impeded by entrepreneurs' threat to borrow excessively from multiple lenders and to shirk. As a consequence, investors earn positive rents at equilibrium. We then...