Dynamic Adverse Selection and Debt

Gilles Chemla () and A. Faure-Grimaud

Working Papers from Toulouse - GREMAQ

Abstract: This paper argues that the strategic use of debt favours the revelation of information in Dynamic adverse selection problems. Our argument is based on the idea that debt is a credible commitment to end long term relationships. Consequently, debt debt encourages a privately informed party to disclose its information at at early stages of a relationship. We illustrate our point with the finiancingndecisionof a monopolist selling a good to a buyer whose valuationis private information.

Keywords: INFORMATION (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 32 pages
Date: 1996
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Citations: View citations in EconPapers (10)

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Working Paper: Dynamic Adverse Selection and Debt (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:gremaq:96.443

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