Financial intermediary-coalitions

John H. Boyd, Edward Prescott

Research output: Contribution to journalArticle

533 Citations (Scopus)

Abstract

In this article an environment in which the investment opportunities of agents are private information is studied and it is shown that financial intermediaries arise endogenously within that environment. It is established that financial intermediaries are part of an efficient arrangement in the sense that they are needed to support the authors' private information core allocations. These intermediaries, which are coalitions of agents, exhibit the following characteristics in equilibrium: they borrow from and lend to large groups of agents; they produce information about investment projects; and they issue claims that have different state contingent payoffs than claims issued by ultimate borrowers.

Original languageEnglish (US)
Pages (from-to)211-232
Number of pages22
JournalJournal of Economic Theory
Volume38
Issue number2
DOIs
StatePublished - 1986
Externally publishedYes

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Financial intermediaries
Private information
Investment project
Investment opportunities
Core allocation
Intermediaries
Large groups

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Financial intermediary-coalitions. / Boyd, John H.; Prescott, Edward.

In: Journal of Economic Theory, Vol. 38, No. 2, 1986, p. 211-232.

Research output: Contribution to journalArticle

Boyd, John H. ; Prescott, Edward. / Financial intermediary-coalitions. In: Journal of Economic Theory. 1986 ; Vol. 38, No. 2. pp. 211-232.
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