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Contracting Sequentially with Multiple Lenders

Attar, Andrea, Casamatta, Catherine, Chassagnon, Arnold and Décamps, Jean-Paul (2017) Contracting Sequentially with Multiple Lenders: the Role of Menus. TSE Working Paper, n. 17-821, Toulouse

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We study a capital market in which multiple lenders sequentially attempt at financing a single borrower under moral hazard. We show that restricting lenders to post take-it-or-leave-it offers involves a severe loss of generality: none of the equilibrium outcomes arising in this scenario survives if lenders offer menus of contracts. This result challenges the approach followed in standard models of multiple lending. From a theoretical perspective, we offer new insights on equilibrium robustness in sequential common agency games.

Item Type: Monograph (Working Paper)
Sub-title: the Role of Menus
Language: English
Date: June 2017
Place of Publication: Toulouse
Uncontrolled Keywords: Multiple Lending, Menus, Strategic Default, Common Agency, Bank Competition
JEL Classification: D43 - Oligopoly and Other Forms of Market Imperfection
D82 - Asymmetric and Private Information
G33 - Bankruptcy; Liquidation
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 16 Apr 2018 14:02
Last Modified: 24 Jul 2018 12:24
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