An entrepreneur has a project that yields revenue R with (a) Show that if the lender knew ? he…
An entrepreneur has a project that yields revenue R with
(a) Show that if the lender knew θ he would not require any collateral.
(b) Suppose that the lender does not know θ. Proceeding by analogy with the price-discrimination example of section 7.1, what do you think are the binding IR and IC constraints? Assuming that the creditor wants to lend
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