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Contracting Sequentially with Multiple Lenders: The Role of Menus

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  • ANDREA ATTAR
  • CATHERINE CASAMATTA
  • ARNOLD CHASSAGNON
  • JEAN PAUL DÉCAMPS

Abstract

We study a credit market in which multiple lenders sequentially offer financing to a single borrower under moral hazard. We show that restricting lenders to post single offers involves a loss of generality: none of the equilibrium outcomes arising in this scenario survives if lenders offer menus of contracts. This result challenges the approach followed in standard models of multiple lending. From a theoretical perspective, we offer new insights on equilibrium robustness in sequential common agency games.

Suggested Citation

  • Andrea Attar & Catherine Casamatta & Arnold Chassagnon & Jean Paul Décamps, 2019. "Contracting Sequentially with Multiple Lenders: The Role of Menus," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(4), pages 977-990, June.
  • Handle: RePEc:wly:jmoncb:v:51:y:2019:i:4:p:977-990
    DOI: 10.1111/jmcb.12552
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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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