Skip to main content
Presentation
1. Costly Screening, Self Selection, and the Existence of a Pooling Equilibrium in Credit Markets (Job Market Paper)
(2011)
  • Pingkang Yu, The George Washington University
Abstract
This paper presents a credit market model that embeds a costly, universal and imperfect screening technology in an otherwise simple model with borrower self-selection and costly lender screening. Contrary to the result in previous models, such as Wang and Williamson (1998) with random screening, the combination of universal screening and type I screening error produces pooling equilibrium as a non-trivial outcome. This result suggests that generalized lenders engaged in price rationing can sometimes compete with specialized lenders serving a single borrower type in credit markets that relies on costly lender screening as a sorting device.
Keywords
  • costly screening,
  • screening cost,
  • self selection,
  • pooling equilibrium,
  • separating equilibrium
Publication Date
2011
Citation Information
Pingkang Yu. "1. Costly Screening, Self Selection, and the Existence of a Pooling Equilibrium in Credit Markets (Job Market Paper)" (2011)
Available at: http://works.bepress.com/pingkang_yu/21/