Credit rationing arising out of informational asymmetry and lack of collateral is a well-recognised economic constraint … that is going to fund the project. The model dynamically estimates the collateral needed by taking into account the … that building trust helps small business owner to significantly reduce the need for collateral. …

: agents choose how much to borrow using a risky asset as collateral, and there are no ad hoc collateral constraints. When the … risky asset is financial-namely, its payoff does not depend on ownership (such as a bond)- collateral requirements are high … as a firm)-collateral requirements are lower and default occurs. The experimental outcomes are in line with the theory …