Multiple Lending and Constrained Efficiency in the Credit Market
Andrea Attar,
Eloisa Campioni and
Gwenael Piaser ()
No 2006_29, Working Papers from Department of Economics, University of Venice "Ca' Foscari"
Abstract:
This paper studies the relationship between competition and incentives in an economy with financial contracts. We concentrate on non-exclusive credit relationships, those where an entrepreneur can simultaneously accept more than one contractual offer. Several homogeneous lenders compete on the contracts they offer to finance the entrepreneur's investment project. We model a common agency game with moral hazard, and we characterize its equilibria. As expected, notwithstanding the competition among the principals (lenders), non-competitive outcomes can be supported. In particular, positive profit equilibria are pervasive. We then provide a complete welfare analysis and show that all equilibrium allocations turn out to be constrained Pareto efficient.
Keywords: Common Agency; Financial Markets; Efficiency (search for similar items in EconPapers)
JEL-codes: D4 D6 G2 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)
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Related works:
Journal Article: Multiple Lending and Constrained Efficiency in the Credit Market (2006) 
Working Paper: Multiple lending and constrained efficiency in the credit market (2005) 
Working Paper: Multiple Lending and Constrained Efficiency in the Credit Market (2005) 
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2006_29
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