Optimal exclusion

Arbeitspapier

In a canonical model of borrowing and lending, an exclusion technology that features full exclusion for a deterministic number of periods following default maximizes stationary equilibrium welfare. This exclusion policy maximizes the stationary volume of mutually beneficial lending transactions. It also maximizes the average welfare of the excluded. The optimal length of exclusion depends on fundamentals such as borrower patience and the direct cost of default. It also depends on incentives to default for strategic rather than exogenous reasons.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Papers ; No. 18-14

Classification and Topics

• Classification: Wirtschaft ; Incomplete Markets ; Asymmetric and Private Information; Mechanism Design
• Subject: endogenous default ; exclusion

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Monnet, Cyril ; Quintin, Erwan
• Event: Veröffentlichung
• (who): University of Bern, Department of Economics
• (where): Bern
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/204914
• Last update: 10.03.2025, 11:46 AM CET