Debt contracts with ex-ante and ex-post asymmetric information: an example
We consider a simple model of lending and borrowing combining two informational problems: adverse selection and costly state verification. Our analysis highlights the interaction between these two informational problems. We notably show that the higher the monitoring cost, the less discriminating the optimal menu of contracts is.
|Date of creation:||03 Feb 2005|
|Date of revision:|
|Note:||Type of Document - pdf. See Ludovic Renou webpage for a technical appendix.|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
References listed on IDEAS
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- Rochet, Jean-Charles, 1987. "A necessary and sufficient condition for rationalizability in a quasi-linear context," Journal of Mathematical Economics, Elsevier, vol. 16(2), pages 191-200, April.
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