Chatterjee, Satyajit
[Verfasser:in]
;
Corbae, Philip Dean
[Sonstige Person, Familie und Körperschaft];
Rios-Rull, José-Victor
[Sonstige Person, Familie und Körperschaft]
A Finite-Life Private-Information Theory of Unsecured Consumer Debt
Erschienen in:FRB of Philadelphia Working Paper ; No. 07-14
Umfang:
1 Online-Ressource (51 p)
Sprache:
Nicht zu entscheiden
DOI:
10.2139/ssrn.991315
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 28, 2007 erstellt
Beschreibung:
The authors present a theory of unsecured consumer debt that does not rely on utility costs of default or on enforcement mechanisms that arise in repeated-interaction settings. The theory is based on private information about a person's type and on a person's incentive to signal his type to entities other than creditors. Specifically, debtors signal their low-risk status to insurers by avoiding default in credit markets. The signal is credible because in equilibrium people who repay are more likely to be the low-risk type and so receive better insurance terms. The authors explore two different mechanisms through which repayment behavior in the credit market can be positively correlated with low-risk status in the insurance market. Their theory is motivated in part by some facts regarding the role of credit scores in consumer credit and auto insurance markets