Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7243311 | Journal of Economic Behavior & Organization | 2015 | 18 Pages |
Abstract
We model an economy where it is beneficial for high-type organizations to collaborate with other high types, and where this assortative-matching pattern allows informed financiers to provide inexpensive funds to partner companies of their high-type ventures. The expected funding benefit associated with finding high-type partners increases in the supply of informed capital, which creates an additional incentive for high types to search. Our main result is that, in such a setting, a critical mass of informed capital is sometimes required for an efficient equilibrium to obtain. We provide a novel channel for how the financial sector can impact real outcomes, specifically by affecting matching patterns.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Fernando Anjos, Alejandro Drexler,