A Monopolistic Credit Rating Agency

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A Monopolistic Credit Rating Agency

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Anette Boom ()

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Anette Boom

Abstract

The paper analyses the demand for credit rating services of a continuum of firms. The firms differ in the probability of their investment's success which is private information. They can use the service of a monopolistic rating agency that sends an imperfect signal of their success probability to the capital market. The demand for rating services turns out to be not always monotonous in its price. If a rating agency exists, only rated firms obtain a credit. There can be oversupply or undersupply of rating services from a social planner's point of view.

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Paper provided by Departmental Working Papers in its series Papers with number 011.

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Handle: RePEc:bef:lsbest:011

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Find related papers by JEL classification:
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

This paper has been announced in the following NEP Reports:

NEP-ALL-2001-01-21 (All new papers)

References listed on IDEAS
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Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer. [Downloadable!] (restricted)
Millon, Marcia H & Thakor, Anjan V, 1985. " Moral Hazard and Information Sharing: A Model of Financial Information Gathering Agencies," Journal of Finance, American Finance Association, vol. 40(5), pages 1403-22, December. [Downloadable!] (restricted)
Other versions:
- Marcia H. Millon & Anjan V. Thakor, 2004. "Moral Hazard and Information Sharing: A Model of Financial Information Gathering Agencies," Finance 0411024, EconWPA. [Downloadable!]
Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September. [Downloadable!] (restricted)
Ramakrishnan, Ram T S & Thakor, Anjan V, 1984. "Information Reliability and a Theory of Financial Intermediation," Review of Economic Studies, Blackwell Publishing, vol. 51(3), pages 415-32, July. [Downloadable!] (restricted)
Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August. [Downloadable!] (restricted)

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