Harsh default penalties lead to Ponzi schemes

In the presence of utility penalties, collateral requirements do not always eliminate the occurrence of Ponzi schemes. Harsh utility penalties may induce effective payments over collateral recollection values. In this event, loans can be larger than collateral costs and Ponzi schemes become possible.

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Year of publication:	2009
Authors:	Páscoa, Mário Rui ; Seghir, Abdelkrim
Published in:	Games and Economic Behavior. - Elsevier, ISSN 0899-8256. - Vol. 65.2009, 1, p. 270-286
Publisher:	Elsevier
Keywords:	Equilibrium Incomplete markets Default Collateral Utility penalties Ponzi schemes

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

Persistent link: https://www.econbiz.de/10005408683