TY  - JOUR
ID  - publications15108
UR  - http://tse-fr.eu/pub/24009
A1  - Tirole, Jean
Y1  - 2012/02//
N2  - The paper provides a first analysis of market jumpstarting and its two-way interaction between mechanism design and participation  constraints. The government optimally overpays for the legacy assets and cleans up the market of its weakest assets, through a mixture of buybacks  and equity injections, and leaves the firms with the strongest legacy assets to the market.  The government reduces adverse selection enough to let the market rebound, but not too much, so as to limit the cost of intervention. The existence of a market imposes no welfare cost.
PB  - American Economic Association
JF  - American Economic Review (AER)
VL  - 102
KW  - market freeze
KW  - market rebound
KW  - asset repurchases
KW  - recapitalization
KW  - mechanism design
KW  - mechanism-dependent participation constraint
SN  - 0002-8282
TI  - Overcoming Adverse Selection: How Public Intervention Can Restore Market Functioning
SP  - 29
AV  - public
EP  - 59
ER  -