Electronic Resource
Berkeley, Calif.
:
Berkeley Electronic Press (now: De Gruyter)
Topics in theoretical economics
4.2004, 1, art5
ISSN:
1534-598X
Source:
Berkeley Electronic Press Academic Journals
Topics:
Economics
Notes:
In a model of bank lending characterized by asymmetric information, we show that banks may use an interim monitoring technology strategically to soften price competition, even though the borrowers face no moral hazard problem. The interim monitoring technology can also be used to alleviate adverse selection. The equilibria that emerge resemble those in vertical product differentiation models. We also show that because of the strategic use of interim monitoring, a bank may forego the use of a costless and perfect ex-ante screening technology.
Type of Medium:
Electronic Resource
URL:
http://www.bepress.com/bejte/topics/vol4/iss1/art5
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