Fragility of reputation and clustering of risk-taking

Reputation concerns in credit markets restrain borrowers' temptations to take excessive risk. The strength of these concerns depends on the behavior of other borrowers, rendering the reputational discipline fragile and subject to breakdowns without obvious changes in economic fundamentals. Furthermore, at an aggregate level, breakdowns are clustered among borrowers with intermediate and good reputations, magnifying otherwise small economic shocks.

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Year of publication:	2013-09-18
Authors:	Ordoñez, Guillermo L.
Published in:	Theoretical Economics. - Econometric Society, ISSN 1555-7561. - Vol. 8.2013, 3
Publisher:	Econometric Society
Subject:	Reputation \| global games \| risk-taking \| fragility

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Extent:	application/pdf
Type of publication:	Article
Classification:	D82 - Asymmetric and Private Information ; E44 - Financial Markets and the Macroeconomy ; G01 - Financial Crises ; G32 - Financing Policy; Capital and Ownership Structure
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011019205