Harsh default penalties lead to Ponzi schemes

DOI10.1016/j.geb.2007.10.002zbMath1156.91427OpenAlexW2162815562MaRDI QIDQ1002339

Abdelkrim Seghir, Mario Rui Pascoa

Publication date: 25 February 2009

Published in: Games and Economic Behavior (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1016/j.geb.2007.10.002

zbMATH Keywords

collateraldefaultequilibriumincomplete marketsPonzi schemesutility penalties

Mathematics Subject Classification ID

Trade models (91B60) General equilibrium theory (91B50)

Related Items (12)

Prices and investment with collateral and default ⋮ Equilibrium with limited-recourse collateralized loans ⋮ Harsh default penalties lead to Ponzi schemes: a counterexample ⋮ Endogenous debt constraints in collateralized economies with default penalties ⋮ Recourse loans and Ponzi schemes ⋮ On Ponzi schemes in infinite horizon collateralized economies with default penalties ⋮ Equilibrium in collateralized asset markets: credit contractions and negative equity loans ⋮ Wealth transfers and the role of collateral when lifetimes are uncertain ⋮ Behavioral arbitrage with collateral and uncertain deliveries ⋮ Financial segmentation and collateralized debt in infinite-horizon economies ⋮ Determination of general equilibrium with incomplete markets and default penalties ⋮ The impossibility of effective enforcement mechanisms in collateralized credit markets

Cites Work

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• Bankruptcy and optimality in a closed trading mass economy modelled as a non-cooperative game
• Incomplete markets, continuum of states and default
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• Competitive equilibria for infinite-horizon economies with incomplete markets
• The optimal bankruptcy rule in a trading economy using fiat money
• INFINITE HORIZON INCOMPLETE MARKETS WITH A CONTINUUM OF STATES
• Debt Constrained Asset Markets
• Infinite Horizon Incomplete Markets
• Default and Punishment in General Equilibrium1
• Stationary Equilibria in Asset-Pricing Models with Incomplete Markets and Collateral
• Collateral Avoids Ponzi Schemes in Incomplete Markets

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