| Popis: |
Three common features of peasant agriculture are a thin land market, debt contracts secured by land and competition between local (inside) and institutional (outside) lenders. If (i) monitoring costs are prohibitive, (ii) borrowers value land more highly than lenders and (iii) lenders do not value it too highly, then standard debt contracts dominate trades of cash for land and leasing arrangements, and a lender demands the borrower's entire holding as collateral. Such a contract may be more attractive than the borrower's reservation alternative if the land has little intrinsic value to the lender. As the lender's value thereof rises, however, his monopoly contract involves a smaller loan, it induces the borrower to put out less effort and it may yield him no more than his reservation utility. When an “insider” and an “outsider” compete in an entry game, with the incumbent insider having low monitoring costs and/or placing a relatively high value on the holding, there exist equilibria in which both are active, borrowers prefer the outsider's offer to no loan, and the insider's best response to entry is to offer better terms still. G20, R51. |
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