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When Opposites Attract: Is the Assortative Matching Always Positive?

Author

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  • Reito, Francesco

Abstract

This paper shows that the positive assortative matching of Ghatak (1999) and Van Tassel (1999) is not a general result and always depends on the distribution of safe and risky types. Some new implications are: (i) borrowers may be better off by forming mixed groups. (ii) a mixed pooling equilibrium is possible when homogeneous pooling equilibria do not exist, and even when the reservation income of borrowers is equal to zero.

Suggested Citation

  • Reito, Francesco, 2011. "When Opposites Attract: Is the Assortative Matching Always Positive?," MPRA Paper 28881, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:28881
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    More about this item

    Keywords

    joint liability lending; assortative matching; screening;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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