Abstract
We examine the relationship between borrowers (firms) and lenders (banks), in a dynamic context, with asymmetric information. In particular, we take into account the fact that firms which apply for a grant have a past. They have liability and the banks will take it into consideration when making their decisions, for extending or not the credit of a defaulting firm. Using the concept of sequential equilibrium, we prove the existence of several types of equilibria. An extreme form of credit rationing can appear in some equilibria, because banks can play mixed strategies, and liquidate some defaulting firms. At last, we compare the efficiency of the different equilibria, and the interest factors which prevail in each of them.
Published Version
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