When Opposites Attract: Is the Assortative Matching Always Positive?

This paper shows that the positive assortative matching of Ghatak (1999) and Van Tassel (1999) is not a general result and always depends on the distribution of safe and risky types. Some new implications are: (i) borrowers may be better off by forming mixed groups. (ii) a mixed pooling equilibrium is possible when homogeneous pooling equilibria do not exist, and even when the reservation income of borrowers is equal to zero.

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Year of publication:	2011-02-17
Authors:	Reito, Francesco
Institutions:	Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
Subject:	joint liability lending \| assortative matching \| screening

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Extent:	application/pdf
Series:	MPRA Paper.
Type of publication:	Book / Working Paper
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; G20 - Financial Institutions and Services. General ; O12 - Microeconomic Analyses of Economic Development
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008854413