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No-trade and Refined Equilibria for Secured Loans in Infinite Horizon

Author

Listed:
  • Mario R. Pascoa

    (University of Surrey)

  • Abdelkrim Seghir

    (Ajman University)

Abstract

When loans are secured but subject to utility penalties on default, notrade equilibria induced by unduly low repayment beliefs can be trivially found for nite horizon economies but not for in nite horizon ones. We illustrate this fact and propose also a re nement of equilibrium that gets rid of spurious no-trade outcomes when they do occur. Known existence results pass this re nement criterion.

Suggested Citation

  • Mario R. Pascoa & Abdelkrim Seghir, 2019. "No-trade and Refined Equilibria for Secured Loans in Infinite Horizon," School of Economics Discussion Papers 0919, School of Economics, University of Surrey.
    • Handle: RePEc:sur:surrec:0919
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    File URL: https://repec.som.surrey.ac.uk/2019/DP09-19.pdf
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    Cited by:

    1. Mário R. Páscoa & Abdelkrim Seghir, 2020. "Recourse loans and Ponzi schemes," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 70(2), pages 527-550, September.

    More about this item

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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