10 Pages Posted: 27 Jun 2008 Last revised: 16 Sep 2008
Date Written: August 2008
Contrary to the assertions of de Meza and Webb (2006), we find that (i) there is no conflict between borrowing costs and the condition for rationing put forth in Stiglitz and Weiss (1981), and (ii) entrepreneurs finance production solely by debt. It is shown also that under the timing conventions of Stiglitz and Weiss (1981) borrowers use either none or all of their liquid endowments.
Keywords: Incomplete information, investment, moral hazard
JEL Classification: D41, D45, D53
Suggested Citation: Suggested Citation
Faynzilberg, Peter S., The Stiglitz-Weiss Condition for Rationing and Endogenous Self-finance: A Comment (August 2008). Available at SSRN: https://ssrn.com/abstract=1151377 or http://dx.doi.org/10.2139/ssrn.1151377