Abstract
We show that the joint liability lending contracts derived in Ghatak (2000) violate an ex post incentive-compatibility constraint which says that the amount of joint liability cannot exceed the amount of individual liability. We derive and characterise optimal separating joint liability contracts incorporating this constraint.
| Original language | English |
|---|---|
| Pages (from-to) | 1005-1015 |
| Number of pages | 11 |
| Journal | Economic Journal |
| Volume | 115 |
| Issue number | 506 |
| Publication status | Published - Oct-2005 |