Asymmetric group loans, non-assortative matching and adverse selection

S. Gangopadhyay, B.W. Lensink

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Abstract

This paper shows that an asymmetric group debt contract, where one borrower co-signs for another, but not vice versa, leads to heterogeneous matching. The analysis suggests that micro finance organizations can achieve the first best by offering asymmetric group contracts. (C) 2014 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)185-187
JournalEconomics Letters
Volume124
Issue number2
DOIs
Publication statusPublished - 2014

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Keywords

  • joint liability

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