de Meza, David 
ORCID: 0000-0002-5638-8310 and Webb, David C. ORCID: 0009-0005-5611-7253
(2003)
The near impossibility of credit rationing.
Financial Markets Group Discussion Papers (459).
Financial Markets Group, The London School of Economics and Political Science, London, UK.
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Abstract
Equilibrium credit rationing in the sense of Stiglitz and Weiss (1981) implies the marginal cost of funds to the borrower is infinite. So borrowers have an overwhelming incentive to cut their loan by a dollar and thereby avoiding being rationed. Ways of doing this include scaling down the project, cutting consumption or infinitesimally delaying the project to accumulate more saving. All of these routes are normally feasible in which case credit rationing is impossible.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | http://fmg.ac.uk |
| Additional Information: | © 2003 The Authors |
| Divisions: | Financial Markets Group |
| Subjects: | H Social Sciences > HG Finance H Social Sciences > HB Economic Theory |
| JEL classification: | G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General |
| Date Deposited: | 13 Aug 2009 13:11 |
| Last Modified: | 11 Dec 2024 18:35 |
| URI: | http://eprints.lse.ac.uk/id/eprint/24858 |
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