Credit Rationing and Payment Incentives

descriptionPublicationkeyboard_double_arrow_right Article 01 Oct 1983Publisher:Oxford University Press (OUP)Journal:The Review of Economic Studies, volume 50, page 639 (issn: 0034-6527,

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Authors: Allen, Franklin;

doi: 10.2307/2297766

Credit Rationing and Payment Incentives

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Abstract

A model of borrowing for production is presented where default leads to exclusion from the capital market. This means contracts are enforceable, provided the current payment is less than or equal to the value of future access to the capital market. The main result of the paper is to show that if this constraint binds then credit is rationed.

Related Organizations

University of Pennsylvania
United States

Keywords

Production theory, theory of the firm, capital market, finance, borrowing for production, credit rationing, Finance etc.

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