Credit from the Monopoly Bank
Yvan Lengwiler () and
Kumar Rishabh ()
Working papers from Faculty of Business and Economics - University of Basel
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: G21 D82 L12 D00 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:bsl:wpaper:2017/15
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