Credit markets with imperfect information: Risk-aversion versus pessimism

Jean Louis Arcand; Stuart McDonald

doi:10.1016/j.econlet.2018.01.029

Credit markets with imperfect information: Risk-aversion versus pessimism

Jean Louis Arcand, Stuart McDonald

Centre for Decision Research and Experimental Economics China

Research output: Journal Publication › Article › peer-review

3 Citations (Scopus)

Abstract

Stiglitz and Weiss (1981) credit rationing is embedded within rank dependent expected utility theory. Our results show that sufficient pessimism or sufficient risk-aversion by borrowers may eliminate adverse selection. Moreover, lender optimism may eliminate credit rationing even when adverse selection exists.

Original language	English
Pages (from-to)	35-38
Number of pages	4
Journal	Economics Letters
Volume	165
DOIs	https://doi.org/10.1016/j.econlet.2018.01.029
Publication status	Published - Apr 2018

Keywords

Credit rationing
Increasing risk
Rank-dependent expected utility
Risk-aversion

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.econlet.2018.01.029

Cite this

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title = "Credit markets with imperfect information: Risk-aversion versus pessimism",

abstract = "Stiglitz and Weiss (1981) credit rationing is embedded within rank dependent expected utility theory. Our results show that sufficient pessimism or sufficient risk-aversion by borrowers may eliminate adverse selection. Moreover, lender optimism may eliminate credit rationing even when adverse selection exists.",

keywords = "Credit rationing, Increasing risk, Rank-dependent expected utility, Risk-aversion",

author = "Arcand, {Jean Louis} and Stuart McDonald",

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doi = "10.1016/j.econlet.2018.01.029",

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AU - McDonald, Stuart

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KW - Increasing risk

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JO - Economics Letters

JF - Economics Letters

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Credit markets with imperfect information: Risk-aversion versus pessimism

Abstract

Keywords

ASJC Scopus subject areas

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