Multiple lending and constrained efficiency in the credit market

Attar, Andréa;Campioni, Eloisa;Piaser, Gwenaël
(2005)

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  • Attar, Andréa
    Author
  • Campioni, EloisaUCLouvain
    Author
  • Piaser, Gwenaël
    Author
Abstract
In this paper we present a model of credit market with several homogeneous lenders competing to finance an investment project. Contracts are non-exclusive, hence the borrower can accept whatever subset of the offered loans. We use the model to discuss efficiency issues in competitive economies with asymmetric information and non-exclusive agreements. We characterize the equilibria of this common agency game with moral hazard and show that they all belong to the constrained Pareto frontier.
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Attar, A., Campioni, E., & Piaser, G. (2005). Multiple lending and constrained efficiency in the credit market (ECON Discussion Papers 2005/24). https://hdl.handle.net/2078.5/39198