Credit from the Monopoly Bank

Yvan Lengwiler and Kumar Rishabh

Working papers from Faculty of Business and Economics - University of Basel

Abstract: We establish that a monopoly bank never uses collateral as a screening device. A pooling equilibrium always exists in which all borrowers pay the same interest rate and put zero collateral. Absence of screening leads to socially inefficient lending in the sense that some socially productive firms are denied credit due to excessively high interest rate.

Keywords: Monopoly bank; credit; contracts; screening; pooling; collateral (search for similar items in EconPapers)
JEL-codes: D00 D82 G21 L12 (search for similar items in EconPapers)
Date: 2017-08-30
New Economics Papers: this item is included in nep-ban and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://edoc.unibas.ch/61303/1/20180306095122_5a9e568a58ddb.pdf (application/pdf)

Related works:
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:bsl:wpaper:2017/15

Access Statistics for this paper

More papers in Working papers from Faculty of Business and Economics - University of Basel Contact information at EDIRC.
Bibliographic data for series maintained by WWZ ().