Entrepreneurial Abilities and Liabilities in a Model of Self-Selection

The role of the liability form as a signalling device is analyzed in a model of occupational choice (entrepreneurs, employees), with asymmetric information in loan markets about the abilities of entrepreneurs. The properties of the equilibrium are described. When factor prices are exogenous, the feasibility of limited liability is a Pareto improvement over a regime where there is only unlimited liability. This result does not hold when factor prices are endogenous.

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Year of publication:	1983
Authors:	Chamley, Christophe
Published in:	Bell Journal of Economics. - The RAND Corporation, ISSN 0361-915X. - Vol. 14.1983, 1, p. 70-80
Publisher:	The RAND Corporation

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Extent:	application/pdf
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005353589