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The Welfare Implications of Costly Monitoring in the Credit Market: A Note
The Economic Journal
Vol. 110, No. 463 (Apr., 2000), pp. 576-580
Stable URL: http://www.jstor.org/stable/2566248
Page Count: 5
You can always find the topics here!Topics: Monitoring costs, Entrepreneurs, Credit, Bank loans, Bank capital, Capital investments, Economic capital, Allocative efficiency, Credit rationing, Economic models
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Hillier and Worrall (1994) derived a surprising result that credit should be further rationed in the costly-monitoring credit-rationing equilibrium. This note shows that their result may be reversed if monitoring costs are endogenously determined.
The Economic Journal © 2000 Royal Economic Society