Credit Rationing in Markets With Imperfect Information The theory was proposed in 1981 by Stiglitz and Weiss and forms a foundational concept in financial economics field that explains imperfections in credit markets
Credit Rationing in Markets With Imperfect Information Credit rationing – a situation in which lenders are unwilling to advance additional funds to borrowers at the prevailing market interest rate – is now widely recognized as a problem arising because of information and control limitation
Credit Rationing in Markets with Imperfect Information This paper examines the conditions for credit volume or borrower rationing in a competitive credit market in which the project characteristics are private information of the borrowers
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Credit markets with imperfect information: Risk-aversion versus . . . In their celebrated article, Stiglitz and Weiss (1981) (henceforth, SW) showed that rationing could obtain in competitive credit markets as a result of adverse selection stemming from the inability of lenders to observe the riskiness of projects undertaken by borrowers
Credit Rationing in Markets with Imperfect Information Although these results are presented in the context of credit markets, we show in Section V that they are applicable to a wide class of principal-agent problems (including those describing the landlord-tenant or employer- employee relationship)
Credit Rationing in Markets with Imperfect Information A model is developed to provide the first theoretical justification for true credit rationing The amount of the loan and the amount of collateral demanded affect the behavior and distribution of borrowers
Credit Rationing in Markets with Imperfect Information This paper investigates the phenomenon of credit rationing in loan markets characterized by imperfect information, arguing that rigidities in interest rates and borrowers' behavior can lead to persistent inequities in credit availability