Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/323258 
Year of Publication: 
2024
Citation: 
[Journal:] Economic Theory [ISSN:] 1432-0479 [Volume:] 79 [Issue:] 4 [Publisher:] Springer Berlin Heidelberg [Place:] Berlin/Heidelberg [Year:] 2024 [Pages:] 1421-1453
Publisher: 
Springer Berlin Heidelberg, Berlin/Heidelberg
Abstract: 
Abstract We consider a dynamic screening model with serially independent types where the agent is short-term liquidity constrained. We model a liquidity constraint as a hard constraint that forces the agent to renege whenever he would suffer a loss from fulfilling the contract terms in a given period. In particular, the violation of a liquidity constraint is a verifiable event that future contract terms can condition on. This verifiability leads to less stringent truth-telling constraints than those considered in the existing literature. We show that the weaker constraints do not affect optimal contracting, however. Moreover, we develop a novel method to study private values settings with continuous types and show that a regularity condition that has analogues in the literature on multi-dimensional screening ensures that the optimal contract is deterministic.
Subjects: 
Dynamic screening
Liquidity constraints
Verifiability
Mean preserving spread
Persistent Identifier of the first edition: 
Additional Information: 
D82;H57
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.