Enforcement with Costly Group Formation

Economics Bulletin, Vol. 15, No. 9, pp. 1−8

Posted: 11 May 2005

See all articles by Prabirendra Chatterjee

Prabirendra Chatterjee

University of Washington - Department of Economics

Sudipta Sarangi

Virginia Polytechnic Institute & State University

Abstract

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

Chatterjee, Prabirendra and Sarangi, Sudipta, Enforcement with Costly Group Formation. Economics Bulletin, Vol. 15, No. 9, pp. 1−8, Available at SSRN: https://ssrn.com/abstract=716524

Prabirendra Chatterjee (Contact Author)

University of Washington - Department of Economics ( email )

Box 353330
Seattle, WA 98195-3330
United States

HOME PAGE: http://students.washington.edu/prabir16/

Sudipta Sarangi

Virginia Polytechnic Institute & State University ( email )

250 Drillfield Drive
Blacksburg, VA 24061
United States

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