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On the Role of Menus in Sequential Contracting: a Multiple Lending Example

Andrea Attar, Catherine Casamatta, Arnold Chassagnon () and Jean-Paul Décamps
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Arnold Chassagnon: Université de Tours and Paris School of Economics

No 409, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We study a capital market in which multiple lenders sequentially attempt at financing a single borrower under moral hazard. We show that restricting lenders to post take-it-or-leave-it offers involves a severe loss of generality: none of the equilibrium outcomes arising in this scenario survives if lenders offer menus of contracts. This result challenges the approach followed in standard models of multiple lending. From a theoretical perspective, we offer new insights on equilibrium robustness in sequential common agency games.

Keywords: Multiple Lending; Menus; Strategic Default; Common Agency; Bank Competition (search for similar items in EconPapers)
JEL-codes: D43 D82 G33 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2017-07-13, Revised 2017-07-13
New Economics Papers: this item is included in nep-ban, nep-cta and nep-mic
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Citations: View citations in EconPapers (2)

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