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Harsh Default Penalties Lead to Ponzi Schemes
Games and Economic Behavior (2009)
  • Abdelkrim Seghir
  • Mario Rui Pascoa
Abstract

In the presence of utility penalties, collateral requirements do not always eliminate the occurrence of Ponzi schemes. Harsh utility penalties may induce effective payments over collateral recollection values. In this event, loans can be larger than collateral costs and Ponzi schemes become possible.

Disciplines
Publication Date
2009
Citation Information
Abdelkrim Seghir and Mario Rui Pascoa. "Harsh Default Penalties Lead to Ponzi Schemes" Games and Economic Behavior Vol. 65 (2009)
Available at: http://works.bepress.com/karim_seghir/2/