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The role of lender behavior in international project finance

Sumru Altug, Sule Ozler () and Murat Usman ()
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Sule Ozler: UCLA, 2263 Bunche Hall, 405 Hilgard Avenue, Los Angeles, CA 90095-1447, USA

Economic Theory, 2002, vol. 19, issue 3, 598 pages

Abstract: A sovereign borrower seeks to raise funds internationally to finance a fixed-size project, which no single lender can finance alone. Lenders cannot lend more than their endowments, which are private information. A coordination failure arises; therefore, some socially desirable projects may not be financed, even if ex post feasible. There are multiple equilibria, and a conflict exists between lenders about which equilibrium to coordinate on. When endowments are volatile, some lenders prefer an equilibrium in which the project is financed with probability $p

Keywords: International project finance; Lender behavior; Private information; Coordination problem; Subgame perfect equilibria. (search for similar items in EconPapers)
JEL-codes: F21 F34 (search for similar items in EconPapers)
Date: 2001-12-20
Note: Received: June 1, 1999; revised version: December 4, 2000
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