Complementarity, coordination, and credit

Alessandro Fedele and Andrea Mantovani

No 2004017, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We consider a start-up firm which applies for a bank loan to implement a project based on complementarity activities. The firm has the possibility to improve the complementarity effect by coordinating the activities. Coordination is costly and can be made either by using internal human resources or by hiring a consulting firm. In the former case the choice of coordination is not verifiable by the bank and a moral hazard problem arises, while in the latter information is symmetric. The role of consulting services is thus to mitigate the informational problem. Without consulting, the firm does not coordinate and eitherobtains no funding or the surplus of the project is not maximized.

Keywords: complementarity; inside and outside coordination; moral hazard (search for similar items in EconPapers)
JEL-codes: D21 D82 O32 (search for similar items in EconPapers)
Date: 2004-04
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Related works:
Journal Article: Complementarity, Coordination, and Credit (2008)
Working Paper: Complementarity, Coordination and Credit (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2004017

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