We present a simple asymmetric information model of the consumer credit with perfectly competitive banks and many borrowers who wish to advance the purchase of an indivisible good. We show a credit rationing equilibrium is possible. Unlike business lending models, it is not just the volume of lending that is wrong but also who gets loans. A policy that targets the interest rate can increase social efficiency, but not achieve the first best.
Consumer credit under asymmetric information: The wrong types apply
Distefano R.
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2020-01-01
Abstract
We present a simple asymmetric information model of the consumer credit with perfectly competitive banks and many borrowers who wish to advance the purchase of an indivisible good. We show a credit rationing equilibrium is possible. Unlike business lending models, it is not just the volume of lending that is wrong but also who gets loans. A policy that targets the interest rate can increase social efficiency, but not achieve the first best.File in questo prodotto:
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