Default and Bankruptcy in a Multistage Exchange Economy
No 963, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University
Either lending must be secured or otherwise some form of default or bankruptcy rules are required to provide a disincentive against strategic default. When many time periods are involved, the mere specification of a penalty which is sufficient for one period of trade, is not sufficient. The complete specification of even a two period game requires that both the treatment of creditors (including seniority conditions) and the nature of the rehabilitation of the debtor must be specified. This paper explores these problems.
Keywords: Bankruptcy; debt; credit (search for similar items in EconPapers)
JEL-codes: G33 D51 (search for similar items in EconPapers)
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