Credit risk, credit rationing, and the role of banks: the case of risk averse lenders
- The standard situation of ex post information asymmetry between borrowers and lenders is extended by risk aversion and heterogenous levels of reservation utility of lenders. In a situation of direct contracting optimal incentive compatible contracts are valuable for both, borrowers and lenders. However, there may appear credit rationing as a consequence of borrowers optimal decision making. Introducing a bank into the market increases total wealth due to the appearance of a portfolio effect in the sense of first order stochastic dominance. It can be shown that this effect may even reduce the problem of credit rationing provided it is sufficiently strong.
| Author: | Thilo Pausch |
|---|---|
| URN: | urn:nbn:de:bvb:384-opus4-711838 |
| Frontdoor URL | https://opus.bibliothek.uni-augsburg.de/opus4/71183 |
| Series (Serial Number): | Volkswirtschaftliche Diskussionsreihe (271) |
| Publisher: | Volkswirtschaftliches Institut, Universität Augsburg |
| Place of publication: | Augsburg |
| Type: | Working Paper |
| Language: | English |
| Date of Publication (online): | 2020/02/20 |
| Year of first Publication: | 2005 |
| Publishing Institution: | Universität Augsburg |
| Release Date: | 2020/02/21 |
| Tag: | JEL: D82, G21, L22 |
| Page Number: | 30 |
| Institutes: | Wirtschaftswissenschaftliche Fakultät |
| Wirtschaftswissenschaftliche Fakultät / Institut für Volkswirtschaftslehre | |
| Schriftenreihen / Volkswirtschaftliche Diskussionsreihe | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Journals: | Volkswirtschaftliche Diskussionsreihe |
| Licence (German): |  Deutsches Urheberrecht |
