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.

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Year of publication:	2006
Authors:	Renou, Ludovic ; Carlier, Guillaume
Institutions:	Université Paris-Dauphine (Paris IX)
Subject:	Debt contracts \| Diversity of opinions \| Screening \| Costly monitoring \| Pooling

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Extent:	application/pdf
Series:	Economics Papers from University Paris Dauphine.
Type of publication:	Book / Working Paper
Notes:	Published in Economic Theory, 2006, Vol. 28, no. 2. pp. 461-473.Length: 12 pages
Classification:	C7 - Game Theory and Bargaining Theory ; D8 - Information and Uncertainty ; G3 - Corporate Finance and Governance
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010707656