Harsh default penalties lead to Ponzi schemes
Mario Pascoa and
Abdelkrim Seghir
Games and Economic Behavior, 2009, vol. 65, issue 1, 270-286
Abstract:
In the presence of utility penalties, collateral requirements do not always eliminate the occurrence of Ponzi schemes. Harsh utility penalties may induce effective payments over collateral recollection values. In this event, loans can be larger than collateral costs and Ponzi schemes become possible.
Keywords: Equilibrium; Incomplete; markets; Default; Collateral; Utility; penalties; Ponzi; schemes (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (30)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:65:y:2009:i:1:p:270-286
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