The Library
Financing experimentation
Tools
Drugovyand, Mikhail and Macchiavello, Rocco (2011) Financing experimentation. Working Paper. Coventry: Social Science Research Network (SSRN). SSRN Working Papers . (Unpublished)
Research output not available from this repository.
Request-a-Copy directly from author or use local Library Get it For Me service.
Official URL: http://papers.ssrn.com/sol3/papers.cfm?abstract_id...
Abstract
An entrepreneur starting a new activity is often uncertain about how good she will be at it and must experiment in order to learn. What happens when the experimentation is financed by a lender? We show that financing experimentation can become harder precisely when experimentation is more promising, for example, when the future is more valuable or when the known activity has a lower payoff. Under ex-post competition from alternative lenders, more optimistic prior can also make financing harder. The optimal contract, which is robust to self-saving by the borrower, entails endogenous collateral requirements as observed in, e.g., micro-credit schemes.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
---|---|---|---|---|---|
Subjects: | H Social Sciences > HB Economic Theory | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Series Name: | SSRN Working Papers | ||||
Publisher: | Social Science Research Network (SSRN) | ||||
Place of Publication: | Coventry | ||||
Official Date: | 26 April 2011 | ||||
Dates: |
|
||||
Institution: | University of Warwick | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Unpublished |
Request changes or add full text files to a record
Repository staff actions (login required)
View Item |