Paper #1136

Título:

A model of collateral, investment and adverse selection

Autor:

Alberto Martin

Data:

Enero 2009

Resumen:

This paper characterizes the relationship between entrepreneurial wealth and aggregate investment under adverse selection. Its main finding is that such a relationship need not be monotonic. In particular, three results emerge from the analysis: (i) pooling equilibria, in which investment is independent of entrepreneurial wealth, are more likely to arise when entrepreneurial wealth is relatively low; (ii) separating equilibria, in which investment is increasing in entrepreneurial wealth, are most likely to arise when entrepreneurial wealth is relatively high and; (iii) for a given interest rate, an increase in entrepreneurial wealth may generate a discontinuous fall in investment.

Palabras clave:

Adverse Selection, Collateral, Investment, Lending Standards, Screening

Códigos JEL:

D82, E44, G10

Área de investigación:

Macroeconomía y Economía Internacional

Publicado en:

Journal of Economic Theory, 144 (4), 2009, 1572-1588.

Descargar el paper en formato PDF