Product quality, lender liability, and consumer credit
AbstractUnder 'linked credit' (also known as 'connected lending'), the buyer obtains a loan from a lender with the specific purpose of purchasing a certain product. Credit is arranged directly by the seller, who acts as an intermediary for the finance company. Within this form of financing, the lender often accepts a measure of liability for defective products. We show that 'connected-lender liability' can work as a signalling device for the reliability of sellers, so as to alleviate the market failure that arises when sellers are better informed than consumers about the quality of their products. Copyright 2004, Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 56 (2004)
Issue (Month): 2 (April)
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- Alena Bicakova, 2007.
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- Alena Bicakova, 2007. "Does the Good Matter? Evidence on Moral Hazard and Adverse Selection from Consumer Credit Market," Economics Working Papers ECO2007/02, European University Institute.
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Temi di discussione (Economic working papers)
598, Bank of Italy, Economic Research and International Relations Area.
- Elisabetta Iossa & Giuliana Palumbo, 2010. "Over-optimism and lender liability in the consumer credit market," Oxford Economic Papers, Oxford University Press, vol. 62(2), pages 374-394, April.
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