A model of lending is presented where loans are established in matches between banks (lenders) and entrepreneurs (borrowers) who meet in a search process. Projects turn out randomly a quick payoff or a long‐term payoff that requires a rollover of the loan. The model generates, under proper...

[This item is a preserved copy. To view the original, visit http://econtheory.org/] The de Finetti Theorem is a cornerstone of the Bayesian approach. Bernardo (1996) writes that its "message is very clear: if a sequence of observations is judged to be exchangeable, then any subset of them must...