A \"coalition proof\" equilibrium for a private information credit economy

Jeffrey Lacker and John Weinberg

No 90-08, Working Paper from Federal Reserve Bank of Richmond

Abstract: This paper examines an economy in which agents with private information about their own productive capabilities seek to raise capital to fund their investment projects. We employ an equilibrium concept which is closely related to Coalition Proof Nash Equilibrium. In equilibrium, all agents who succeed in raising capital (entrepreneurs) are pooled; they all receive the same contract or consumption schedule. Entrepreneurs, however, are separated from those who fail to raise capital. This separation results in productive efficiency for the economy. If the economy has no viable alternative investment opportunity (other than agents' projects) then equilibrium allocations can be supported by a (non-intermediated) securities market. If there is a viable alternative, the equilibrium allocations can only be supported through the formation of a form of financial intermediary coalition. ; A preliminary draft of this paper was presented at the 1990 meeting of the WEA. We would like to thank Paul Fisher for his comments on that earlier draft. We have also benefited from extensive discussions with Charles Kahn. His comments, and those of Nicholas Yannelis and other participants in the University of Illinois Microeconomic Theory workshop and the Purdue Macroeconomics workshop are greatly appreciated. As the authors retain mutual responsibility for all errors, past, present and future, comments continue to be appreciated. The views expressed are those of the authors and do not represent the views of the Federal Reserve Bank of Richmond or the Federal Reserve Board.

Keywords: Capital; market (search for similar items in EconPapers)
Date: 1990
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.richmondfed.org/publications/research/working_papers/1990/wp_90-8.cfm (text/html)
https://www.richmondfed.org/-/media/RichmondFedOrg ... /1990/pdf/wp90-8.pdf Full text (application/pdf)

Related works:
Journal Article: A Coalition Proof Equilibrium for a Private Information Credit Economy (1993)
Working Paper: A "COALITION PROOF" EQUILIBRIUM FOR A PRIVATE INFORMATION CREDIT ECONOMY (1990)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedrwp:90-08

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper from Federal Reserve Bank of Richmond Contact information at EDIRC.
Bibliographic data for series maintained by Christian Pascasio ().