Debt contracts with ex-ante and ex-post asymmetric information: an example

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. Copyright Springer-Verlag Berlin/Heidelberg 2006

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Year of publication:	2006
Authors:	Carlier, G. ; Renou, L.
Published in:	Economic Theory. - Springer. - Vol. 28.2006, 2, p. 461-473
Publisher:	Springer
Subject:	Debt contracts \| Diversity of opinions \| Screening \| Costly monitoring \| Pooling

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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