A Monopolistic Credit Rating Agency

Anette Boom

Departmental Working Papers

Abstract: The paper analyses the demand for credit rating services of a continuum of firms. The firms differ in the probability of their investment's success which is private information. They can use the service of a monopolistic rating agency that sends an imperfect signal of their success probability to the capital market. The demand for rating services turns out to be not always monotonous in its price. If a rating agency exists, only rated firms obtain a credit. There can be oversupply or undersupply of rating services from a social planner's point of view.

JEL-codes: D42 D82 G21 L12 L15 (search for similar items in EconPapers)
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