Competitive equilibrium in the credit market under asymmetric information
type: Item
instance of: scholarly article
title: Competitive equilibrium in the credit market under asymmetric information
zbMATH Open document ID: 0609.90014
DOI: 10.1016/0022-0531(87)90108-6
author: David Besanko
author: Anjan V. Thakor
published in: Journal of Economic Theory
publication date: 1987-01-01T00:00:00Z
review text: We study a competitive credit market equilibrium in which all agents are risk neutral and lenders a priori unaware of borrowers' default probabilities. Admissible credit contracts are characterized by the credit granting probability, the loan quantity, the loan interest rate and the collateral required. The principal result is that in equilibrium lower risk borrowers pay higher interest rates than higher risk borrowers; moreover, the lower risk borrowers get more credit in equilibrium than they would with full information. No credit is rationed and collateral requirements are higher for the lower risk borrowers.
Mathematics Subject Classification ID: 91B50
zbMATH DE Number: 3986982
zbMATH Keywords: competitive credit market equilibrium
MaRDI profile type: Publication
full work available at URL: 0022-0531(87)90108-6
OpenAlex ID: W2015214812
cites work: Q3903596
cites work: Mechanism Design by an Informed Principal
cites work: Informational Equilibrium
cites work: A model of insurance markets with incomplete information
description: scientific article; zbMATH DE number 3986982