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| Author: | Chemla, G. Faure-Grimaud, A. |
| Title: | Dynamic adverse selection and debt |
| Journal: | European Economic Review
2001 : OCT, VOL. 45:9, p. 1773-1792 |
| Index terms: | ADVERSE SELECTION DEBT |
| Freeterms: | RENEGOTIATION |
| Language: | eng |
| Abstract: | In many long-term relationships, parties may be reluctant to reveal their private information in order to benefit from their informational advantage in the future. The authors point out that the strategic use of debt by an uninformed party relieves the information revelation problem in dynamic contexts. Their argument is based on the idea that (renegotiable) debt is a credible commitment to end a long-term relationship if information is not revealed. |
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