We study a capital market in which multiple lenders sequentially attempt at financing a single borrower under moral hazard. We show that restricting lenders to post take-it-or-leave-it offers involves a severe loss of generality: none of the equilibrium outcomes arising in this scenario survives if lenders offer menus of contracts. This result challenges the approach followed in standard models of multiple lending. From a theoretical perspective, we offer new insights on equilibrium robustness in sequential common agency games.
Multiple Lending; Menus; Strategic Default; Common Agency; Bank Competition;
- D43: Oligopoly and Other Forms of Market Imperfection
- D82: Asymmetric and Private Information • Mechanism Design
- G33: Bankruptcy • Liquidation
Andrea Attar, Catherine Casamatta, Arnold Chassagnon et Jean-Paul Décamps, « Contracting Sequentially with Multiple Lenders: the Role of Menus », Journal of Money, Credit and Banking, vol. 51, n° 4, juin 2019, p. 977–990.
Journal of Money, Credit and Banking, vol. 51, n° 4, juin 2019, p. 977–990