Sequential Banking

Dados Bibliográficos

ID10172255
AutoresDavid S Bizer, Peter M Demarzo
Ano1992
Volume100
Fascículo1
Páginas41-61
Data de publicação1992-02-01
Peer ReviewedSim
Open AccessNão
TipoARTICLE
PeriódicoJournal of Political Economy (JOURNAL)
Identificadores do periódicoISSN: 0022-3808 • E-ISSN: 1537-534X
EditoraUniversity of Chicago Press (PUBLISHER • US)
DOI10.1086/261806
OpenAlexW4254192478
IdiomaEN
Citações recebidas12

The authors study environments in which agents may borrow sequentially from more than one leader. Although debt is prioritized, additional lending imposes an externality on prior debt because, with moral hazard, the probability of repayment of prior loans decreases. Equilibrium interest rates are higher than they would be if borrowers could commit to borrow from at most one bank. Even though the loan terms are less favorable than they would be under commitment, the indebtedness of borrowers is greater. Further, additional lending causes the probability of default to increase. The results apply to markets for consumer, corporate, and international debt. Copyright 1992 by University of Chicago Press

Actuarial science · Business · Commit · Credit risk · Debt · Economics · Externality · Financial system · Incentive · Interest rate · Loan · Microeconomics · Monetary economics · Moral hazard · Probability of default · Banking stability, regulation, efficiency · Economic theories and models · Finance · Housing Market and Economics