Effects of credit limit on efficiency and welfare in a simple general equilibrium model

Ngoc‐Sang Pham () and Hien Pham
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Ngoc‐Sang Pham: EM Normandie - École de Management de Normandie = EM Normandie Business School
Hien Pham: Department of Economics, University of Rochester
Authors registered in the RePEc Author Service: Ngoc-Sang Pham

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Abstract: We consider a simple general equilibrium model with two agents under the presence of financial market imperfections. Agents can borrow to realize their productive project up to the level of debt whose repayment reaches a fraction of the project's value (the so‐called credit limit ). After characterizing the whole set of equilibria, we investigate the connection between credit limit, (individual and social) welfare, and efficiency. We also compute the optimal credit limit which maximizes the social welfare function.

Date: 2019-12-18
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Published in International Journal of Economic Theory, 2019, 17 (4), pp.446-470. ⟨10.1111/ijet.12245⟩

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Related works:
Journal Article: Effects of credit limit on efficiency and welfare in a simple general equilibrium model (2021)
Working Paper: Effects of credit limit on efficiency and welfare in a simple general equilibrium model (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05498312

DOI: 10.1111/ijet.12245

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