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A Reconsideration of the Stiglitz-Weiss Model with a Discrete Number of Borrower Types


Author Info

  • Susanne Steger
  • Helke Waelde


In this paper we show that the equilibrium in the Stiglitz-Weiss model (Stiglitz and Weiss, 1981) is a two-interest rate equilibrium. For this we use the true return-function for banks shown by Arnold (2005), the assumption of Bertrand competition and make a consideration for a discrete number of borrowers. Rationing only affects one group of the borrowers, i.e. the borrowers with a safe project. The risky group always receives the funds it demands.

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Bibliographic Info

Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 028.

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Length: 20 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:bav:wpaper:028_steger_waelde

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Related research

Keywords: credit rationing; asymmetric information; adverse selection;

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