Entrepreneurial Abilities and Liabilities in a Model of Self-Selection
AbstractThe role of the liability form as a signalling device is analyzed in a model of occupational choice (entrepreneurs, employees), with asymmetric information in loan markets about the abilities of entrepreneurs. The properties of the equilibrium are described. When factor prices are exogenous, the feasibility of limited liability is a Pareto improvement over a regime where there is only unlimited liability. This result does not hold when factor prices are endogenous.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 580.
Length: 34 pages
Date of creation: Jan 1981
Date of revision:
Publication status: Published in Bell Journal of Economics (Spring 1983), 14(1): 70-80
Note: CFP 598.
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
Other versions of this item:
- Christophe Chamley, 1983. "Entrepreneurial Abilities and Liabilities in a Model of Self-Selection," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 70-80, Spring.
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