This paper analyses the problem of willful default by a borrower, who is financially able to repay the loan. This problem termed Moral Hazard, affects the functioning and efficiency of the loan market. If lenders are unable to distinguish between honest and dishonest borrowers, borrowers are shown to get smaller loans and at higher interest rates than they would otherwise. It is also demonstrated how this problem can lead to a supply curve which becomes...
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INFORMATION
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1983/10/01
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Document de travail départemental
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DRD102
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1
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1
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2012/12/13
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Disclosed
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Moral hazard in competitive loan markets : credit ceilings in domestic and international lending
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moral hazard