A Reconsideration of the Stiglitz-Weiss Model with a Discrete Number of Borrower Types

Susanne Steger and Helke Waelde

No 28, Working Papers from Bavarian Graduate Program in Economics (BGPE)

Abstract: In this paper we show that the equilibrium in the Stiglitz-Weiss model (Stiglitz and Weiss, 1981) is a two-interest rate equilibrium. For this we use the true return-function for banks shown by Arnold (2005), the assumption of Bertrand competition and make a consideration for a discrete number of borrowers. Rationing only affects one group of the borrowers, i.e. the borrowers with a safe project. The risky group always receives the funds it demands.

Keywords: credit rationing; asymmetric information; adverse selection (search for similar items in EconPapers)
JEL-codes: D82 E51 G21 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2007-08
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Persistent link: https://EconPapers.repec.org/RePEc:bav:wpaper:028_steger_waelde

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