Econometrica Vol. 45 No. 8 1977

A Model of Borrowing and Lending with Bankruptcy

Martin Hellwig^1,2

¹ Max Planck Society · ² Max Planck Institute for Behavioral Economics

Abstract

[The paper analyzes borrowing and lending on uncertain future income, with a positive probability of bankruptcy. Creditor and debtor play a strategic game, in which it is shown that optimal creditor behavior is not generally well defined. The model suggests that under uncertainty the availability of credit may be restricted below that which would be predicted by classical microeconomic theory.]

DOI

10.2307/1914117

Volume

45

Issue

8

Pages

1879

Sources

bibtex:phds-export.bib crossref openalex

Cite

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