Microeconomic Models of Credit Contracting

This book deals with the problems of optimal financial contracting under asymmetric information. The chapters 2 and 3 are motivated by the problems faced by entrepreneurs and investors in the economics in transition. These two chapters take the debt form of the financial contract as given and analyze the problems of renegotiation and government credit support. The chapter 4 is devoted to the derivation and characterization of optimal financial contracts for financing investment projects with absolute priority violation. This chapter models the situation of ex post asymmetric information between entrepreneurs and lenders.