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Macchiavello, Rocco (2013) Financing experimentation. Working Paper. Coventry, UK: Department of Economics, University of Warwick. Warwick economics research papers series (TWERPS), Volume 2013 (Number 1025).
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Text (Working paper)
WRAP_twerp_1025_macchiavello.pdf - Published Version Download (476Kb) | Preview |
Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Abstract
Entrepreneurs must experiment to learn how good they are at a new activity.
What happens when the experimentation is financed by a lender? Under common
scenarios, i.e., when there is the opportunity to learn by "starting small" or when
"no-compete" clauses cannot be enforced ex-post, we show that financing experi-
mentation can become harder precisely when it is more profitable, i.e., for lower
values of the known-arm and for more optimistic priors. Endogenous collateral
requirements (like those frequently observed in micro-credit schemes) are shown to
be part of the optimal contract.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance |
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Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Economics -- Mathematical models , Competition , Loans , Businesspeople | ||||
Series Name: | Warwick economics research papers series (TWERPS) | ||||
Publisher: | Department of Economics, University of Warwick | ||||
Place of Publication: | Coventry, UK | ||||
Official Date: | March 2013 | ||||
Dates: |
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Volume: | Volume 2013 | ||||
Number: | Number 1025 | ||||
Number of Pages: | 44 | ||||
Institution: | University of Warwick | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Published | ||||
Date of first compliant deposit: | 2 February 2017 | ||||
Date of first compliant Open Access: | 2 February 2017 |
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