Article ID Journal Published Year Pages File Type
7349039 Economics Letters 2018 4 Pages PDF
Abstract
Stiglitz and Weiss (1981) credit rationing is embedded within rank dependent expected utility theory. Our results show that sufficient pessimism or sufficient risk-aversion by borrowers may eliminate adverse selection. Moreover, lender optimism may eliminate credit rationing even when adverse selection exists.
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Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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Credit markets with imperfect information: Risk-aversion versus pessimism
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