Renou, Ludovic and Carlier, Guillaume (2003) Optimal debt contracts and diversity of opinions: an extreme case of bunching. Working Paper. Royal Economic Society Annual Conference 2003.
Renou, Ludovic and Carlier, Guillaume (2003) Optimal debt contracts and diversity of opinions: an extreme case of bunching. Working Paper. Royal Economic Society Annual Conference 2003.
Renou, Ludovic and Carlier, Guillaume (2003) Optimal debt contracts and diversity of opinions: an extreme case of bunching. Working Paper. Royal Economic Society Annual Conference 2003.
Abstract
This paper studies optimal menus of debt contracts such as secured debentures or bonds, in the presence of diversity of opinions between borrowers and lenders. We first characterize incentive compatible contracts, then prove the existence of optimal debt contracts. Finally, we are able to explicitly characterize such optimal menus within a specific case: we notably show that borrowers optimally offer at most two contracts, which is an extreme case of bunching.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Uncontrolled Keywords: | debt contracts; heterogeneity of beliefs; multidimensional screening; bunching |
| Subjects: | H Social Sciences > HB Economic Theory |
| Divisions: | Faculty of Social Sciences > Economics, Department of |
| Depositing User: | Jim Jamieson |
| Date Deposited: | 06 Jan 2013 23:06 |
| Last Modified: | 06 Jan 2013 23:06 |
| URI: | http://repository.essex.ac.uk/id/eprint/5006 |