Enforcement with Costly Group Formation
Economics Bulletin, Vol. 15, No. 9, pp. 1−8
Posted: 11 May 2005
The joint liability literature claims that positive assortative matching, or risk homogeneity, is always the first best solution. We examine this claim in presence of group formation costs and find that the assertion is not always true.
Keywords: Group Lending, Risk Heterogeneity, Formation Costs
JEL Classification: D81, G20, O12
Suggested Citation: Suggested Citation