Enforcement Frictions, Enduring Relations, and Credit Market Equilibrium
This paper introduces a matching model of credit and exchange in which potentiel difficulties in the enforcement of contracts play a central role. The repeated games framework that is developed is used to analyze the pricing and availability of credit, the consequences of information monopoly in credit markets, and the effect of the introduction of a credit intermediary on economic activity. The model generates and endogenous credit limit and highlights the importance of enduring relations. Also studied are the effects on the pricing and availability of credit of improvements in production technology, of sanctions, and of the value of collateral.
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|Date of creation:||1996|
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