Interactions between Signaling and Repeated Play with Borrower Default.
Abstract
This is a study of economic risk between lender and borrower. Signaling in credit markets has received considerable attention in the economics literature, but the signaling models involve only a single transaction. Many credit models allude to repeated transactions. The few in which repetition is formally analyzed incorporate no other mechanism to overcome the incentive problem. The models developed in this thesis will employ both. The primary aim is to study the effects of signaling in the context of standing relationships between the lender and borrowers. The ability of the lender to make commitments to its loan customers is critical in determining the optimal loan contracts offered. Signaling models have since been used to address problems of adverse selection in labor markets, insurance markets, credit markets, and many others.
Document Details
- Document Type
- Technical Report
- Publication Date
- Oct 01, 1985
- Accession Number
- ADA163192
Entities
People
- Carol L. Such
Organizations
- Stanford University