Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
998328 | Journal of Financial Stability | 2011 | 10 Pages |
Abstract
We explore the inter-temporal effects of the pool externalities caused by imperfect screening in competitive credit markets. We find that imperfect screening may, depending on the parameters of the model, generate excessive screening, inefficient duplication of screening or screening cycles. Whenever screening cycles occur they are manifestations of either socially excessive or insufficient screening. We present a full equilibrium characterization and a welfare analysis. The implementation of socially optimal lending decisions requires communication across lenders (i.e. information sharing), which decentralized markets typically cannot achieve.
Keywords
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Social Sciences and Humanities
Economics, Econometrics and Finance
Economics, Econometrics and Finance (General)
Authors
Thomas Gehrig, Rune Stenbacka,