Marta Serra Garcia
| Date of PhD defense: | 14 June 2011 |
| Title of thesis: | Communication, Lending Relationship and Collateral |
| ISBN: | 978 90 5668 291 0 |
| Promotores: | Prof.dr. Eric van Damme Prof.dr. Jan Potters |
Abstract:
This thesis examines information problems in two different environments: public good provision and the credit market. The first part of the thesis studies the effect of communication on the provision of a public good, when only one player is informed about the return of contributions. Chapter 2 asks, does behavior depend on what the informed player talks about? Language is shown to matter: in a controlled lab experiment, when talk is about contributions, informed players lie less and contribute more often to the public good, than when talk is about private information. In turn, Chapter 3 asks, do players lie when the truth conflicts with efficiency? The experimental results reveal that, when communication must be precise, lying is common, but also show that informed players turn to vagueness, when possible, to hide inconvenient truths.
The second part of the thesis deals with two problems of moral hazard in the credit market, arising when lenders cannot control borrowers’ actions. Chapter 4 asks, how does weak debt enforcement, which allows defaulting borrowers to reinvest lenders’ funds, affect lending relationships? Weak enforcement is shown to reduce credit volume, especially at the beginning of relationships. Further, Chapter 5 asks, how does the availability of collateral affect borrower behavior and credit supply, when borrower effort is unobservable and unenforceable? Experimentally, collateral is found to significantly increase borrower effort and access to credit, but also to have the potential of reducing credit demand.
Global / English