Debt contracts with ex-ante and ex-post asymmetric information: an example
Renou, Ludovic; Carlier, Guillaume (2006), Debt contracts with ex-ante and ex-post asymmetric information: an example, Economic Theory, 28, 2, p. 461-473. http://dx.doi.org/10.1007/s00199-005-0632-7
TypeArticle accepté pour publication ou publié
Journal nameEconomic Theory
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Abstract (EN)We consider a simple model of lending and borrowing combining two informational problems: adverse selection and costly state verification. Our analysis highlights the interaction between these two informational problems. We notably show that the higher the monitoring cost, the less discriminating the optimal menu of contracts is.
Subjects / KeywordsDebt contracts; Diversity of opinions; Screening; Costly monitoring; Pooling
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