Renou, Ludovic (2003) Beliefs about Beliefs and Endogenous Formation of a Multi-lender Coalition in a Costly State Verification Model. Working Paper. European University Institute Economics Working Papers ECO2003/21.
Renou, Ludovic (2003) Beliefs about Beliefs and Endogenous Formation of a Multi-lender Coalition in a Costly State Verification Model. Working Paper. European University Institute Economics Working Papers ECO2003/21.
Renou, Ludovic (2003) Beliefs about Beliefs and Endogenous Formation of a Multi-lender Coalition in a Costly State Verification Model. Working Paper. European University Institute Economics Working Papers ECO2003/21.
Abstract
The paper generalizes a costly state verification model along two dimensions: 1) diversity of opinions, and 2) endogenous formation of a financial intermediary, modeled as a multilender coalition. In contrast with previous contributions (e.g. 35 and 36), our model can account for the coexistence of financial intermediation and direct lending (a non-trivial equilibrium). We prove the existence of such non-trivial equilibria and provide a complete characterization of them. Under some parameter conditions, the stronger the diversity of opinions, the smaller the expected coalition size.
Item Type: | Monograph (Working Paper) |
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Uncontrolled Keywords: | costly state verification; higher-order beliefs; multi-lender coalition; heterogenous prior; incomplete information |
Subjects: | H Social Sciences > HB Economic Theory |
Divisions: | Faculty of Social Sciences > Economics, Department of |
Depositing User: | Jim Jamieson |
Date Deposited: | 06 Jan 2013 23:12 |
Last Modified: | 06 Jan 2013 23:12 |
URI: | http://repository.essex.ac.uk/id/eprint/5007 |