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Imperfect Information, Uncertainty, and Credit Rationing: Comment and Extension

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  • Kerry D. Vandell

Abstract

The Jaffee and Russell [1976] model of credit rationing under imperfect information and uncertainty suggests that a single-contract equilibrium will tend to occur at a point of rationing and that a multiple-contract equilibrium will likely be unstable. This paper respecifies and extends the Jaffee-Russell model to incorporate default expectations on the demand side and to consider the price of credit more appropriately to be the net (after expected default) yield rather than the contract rate. Results show rationing is not necessary in the single-contract equilibrium case, nor is an unstable equilibrium possible in the multiple-contract case.

Suggested Citation

  • Kerry D. Vandell, 1984. "Imperfect Information, Uncertainty, and Credit Rationing: Comment and Extension," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 841-863.
    • Handle: RePEc:oup:qjecon:v:99:y:1984:i:4:p:841-863.
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    File URL: http://hdl.handle.net/10.2307/1883128
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    Cited by:

    1. Kerry D. Vandell, 1984. "On the Assessment of Default Risk in Commercial Mortgage Lending," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 270-296, September.
    2. Gerhard Clemenz & Mona Ritthaler, 1992. "Credit markets with asymmetric information : a survey," Finnish Economic Papers, Finnish Economic Association, vol. 5(1), pages 12-26, Spring.
    3. Temesgen Belissa & Robert Lensink & Anne Winkel, 2020. "Effects of Index Insurance on Demand and Supply of Credit: Evidence from Ethiopia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(5), pages 1511-1531, October.
    4. Elvin Wyly & Markus Moos & Daniel Hammel & Emanuel Kabahizi, 2009. "Cartographies of Race and Class: Mapping the Class‐Monopoly Rents of American Subprime Mortgage Capital," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 33(2), pages 332-354, June.
    5. Innes, Robert, 1987. "Asymmetric Information And The Entrepreneurial Firm: Capital Structure, Investment And Government Intervention," Working Papers 225813, University of California, Davis, Department of Agricultural and Resource Economics.

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