Loan Screening under Symmetrically Imperfect Information

Yun Gao and Kenichi Ueda
Additional contact information
Yun Gao: Hong Kong Monetary Authority
Kenichi Ueda: The University of Tokyo

No CARF-F-614, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: We propose a canonical model of loan screening under symmetrically imperfect information. The project quality is unknown to both a lender and a borrower, but it is revealed with noise to the lender with cost. We show that, under meaningful parameter values, there are three types of equilibria: (i) screening and separating equilibrium, (ii) non-screening and pooling equilibrium, and (iii) non-screening and cheap-information-based separating equilibrium. They are all constrained socially optimal. In particular, the screening and separating equilibrium emerges when the average project quality is low or when the interest rate is high.

Pages: 95
Date: 2025-12
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.carf.e.u-tokyo.ac.jp/wp/wp-content/uploads/2025/12/F614.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:cfi:fseres:cf614

Access Statistics for this paper

More papers in CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo Contact information at EDIRC.
Bibliographic data for series maintained by ().