Money, Private Loan, and Asymmetric Information─A Search-theoretic Approach

• Main Authors: Kai-Yuan Huang, 黃楷元
• Other Authors: 李怡庭
• Format: Others
• Language: en_US
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/28907175286113935306

碩士 === 國立臺灣大學 === 經濟學研究所 === 92 === A search-theoretic model is used to study how the informational imperfection regarding the types of investment projects and the competition between the two trading sectors: search sector and banking sector influence the welfare and the equilibrium price of the economy. We find that lenders can unravel the asymmetric information by a set of financial contracts. The weighted average welfare is lower in the economy with asymmetric information than in the economy with full information. The reduction in welfare of the economy with asymmetric information mainly comes from the screening cost incurred by lenders. The competitions between search sector and banking sector have influence on the equilibrium price and the set of parameters for the equilibrium to exist. When entrepreneurs have higher value, producers will be less willing to trade with money holders. Thus money holders have to offer a better price, which may not be sustained in equilibrium. We also find that, through numerical experiments, asymmetric information problem does not necessarily narrow down the set of parameters for the equilibrium to exist. If we consider the parameter “initial investment cost”, then the range of parameter for the equilibrium to exist is larger in the economy with asymmetric information than in the economy with full information. This is because of the competition between the two sectors in the economy and how the competition affects the expected utility of all types of agents.