In a credit market with enforcement constraints, we study the effects of a change in the outside options of a potential defaulter on the terms of the credit contract, as well as on borrower payoffs. The results crucially depend on the allocation of quot;bargaining powerquot; between the borrower...

We study the problem of loan enforcement in an informal credit market where credit histories of borrowers are not available to lenders, raising the possibility of serial default. We show that if there is critical minimum proportion of natural defaulters in the populatin, then there exists an...

Why is rent-seeking so endemic in societies? Might it not be possible to design a Pareto-improving social decision rule that sidesteps the inefficient waste of resources resulting from conflict? We study this question for a multi-player contest. We assume that a benevolent planner knows the...