Credit markets with asymmetric information
type: Item
instance of: scholarly article
title: Credit markets with asymmetric information
zbMATH Open document ID: 0595.90001
author: Gerhard Clemenz
published in: Lecture Notes in Economics and Mathematical Systems
publication date: 1986-01-01T00:00:00Z
review text: The concepts of the (rather) new field of ''information economics'' are applied to the analysis of credit markets. The favourite ''gimmicks'' of the economics of (asymmetric) information, ''adverse selection'' and ''moral hazard'' are used to explain the possibility of equilibrium credit rationing. The author presents four reasons for a possible adverse influence of interest rate increases on the probability of default of borrowers. One of them is the ''Honesty-model''. Here, borrowers differ with respect to the costs of default and a larger proportion refuses to repay the loan as the interest rate is increased. This and other reasons make banks hesitate to increase the loan rate beyond a bank optimal rate, even if there is an excess demand at that rate. Most interestingly, the explanations for credit rationing are presented in a multiperiod framework. In the case of the Honesty-model, the multiperiod analysis allows for the endogenisation of the costs of default. In the three other models, the multiperiod analysis turns out to be especially fruitful, too. It is also shown that screening of customers will not outrule the possibility of rationing equilibria, in general. The book is well written and represents an important contribution to the theory of financial markets.
Mathematics Subject Classification ID: 91B99
Mathematics Subject Classification ID: 90-02
zbMATH DE Number: 3959068
zbMATH Keywords: asymmetric information
zbMATH Keywords: information economics
zbMATH Keywords: credit markets
zbMATH Keywords: adverse selection
zbMATH Keywords: moral hazard
zbMATH Keywords: equilibrium credit rationing
zbMATH Keywords: Honesty-model
zbMATH Keywords: financial markets
reviewed by: Alfred Endres
MaRDI profile type: Publication
Recommended article: Competitive equilibrium in the credit market under asymmetric information
Recommended article: INFORMATION ASYMMETRY IN PRICING OF CREDIT DERIVATIVES
Recommended article: Credit risk and asymmetric information: a simplified approach
Recommended article: Credit risk with asymmetric information on the default threshold
Recommended article: Credit markets with imperfect information: risk-aversion versus pessimism
Recommended article: Modelo de risco e decisão de crédito baseado em estrutura de capital com informação assimétrica
Recommended article: Consumer credit under asymmetric information: the wrong types apply
Recommended article: Credit risk contagion based on asymmetric information association
Recommended article: Collateralized assets and asymmetric information
Recommended article: Q3644466
description: scientific article; zbMATH DE number 3959068