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Enforcement Frictions, Enduring Relations, and Credit Market Equilibrium

Author

Listed:
  • Schulz, E

Abstract

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.

Suggested Citation

  • Schulz, E, 1996. "Enforcement Frictions, Enduring Relations, and Credit Market Equilibrium," Department of Economics Working Papers 180, Department of Economics, Williams College.
    • Handle: RePEc:wil:wileco:180
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    More about this item

    Keywords

    ECONOMIC MODELS; CREDIT; GENERAL EQUILIBRIUM; FINANCIAL MARKET;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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