A finite-life private-information theory of unsecured consumer debt

• 成果类型: Article
• 署名作者: Chatterjee, Satyajit; Corbae, Dean; Rios-Rull, Jose-Victor
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Philadelphia; University of Texas System; University of Texas Austin; University of Pennsylvania; Center for Economic & Policy Research (CEPR); National Bureau of Economic Research
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2007.01.018
• 发表日期: 2008
• 页码: 149-177
• 关键词: unsecured consumer debt; bankruptcy; default; adverse selection; Credit score; insurance

摘要

We present a theory of unsecured consumer debt that does not rely on utility costs of default or on enforcement mechanisms that arise in repeated-interaction settings. The theory is based on private information about a person's type and on a person's incentive to signal his type to entities other than creditors. Specifically, debtors signal their low-fisk status to insurers by avoiding default in credit markets. The signal is credible because in equilibrium people who repay are more likely to be the low-risk type and so receive better insurance terms. We explore two different mechanisms through which repayment behavior in the credit market can be positively correlated with low-risk status in the insurance market. Our theory is motivated in part by some facts regarding the role of credit scores in consumer credit and auto insurance markets. (C) 2007 Elsevier Inc. All rights reserved.