Chatterjee, Satyajit; Corbae, Dean; Rios-Rull, Jose-Victor - Society for Economic Dynamics - SED - 2006
We propose a theory of unsecured debt that is based on the existence of private information about a person's type and on the fact that some debtors have the incentive to forego bankruptcy in order to signal their type. The theory formalizes the idea that the type of a person is relevant to...