Reputation and Credit Market Formation: How Relational Incentives and Legal Contract Enforcement Interact

The evidence suggests that relational contracting and legal rules play an important role in credit markets but on the basis of the prevailing field data it is difficult to pin down their causal impact. Here we show experimentally that relational incentives are a powerful causal determinant for the existence and performance of credit markets. In fact, in the absence of legal enforcement and reputation formation opportunities the credit market breaks down almost completely while if reputation formation is possible a stable credit market emerges even in the absence of legal enforcement of debt repayment. Introducing legal enforcement of repayments causes a further significant increase in credit market trading but has only a surprisingly small impact on overall efficiency. The reason is that legal enforcement of debt repayments weakens relational incentives and exacerbates another moral hazard problem in credit markets – the choice of inefficient high-risk projects.credit markets, relationship lending, reputation formation, legal enforcement

Credit Reporting, Relationship Banking, and Loan Repayment

This paper examines the impact of credit reporting on the repayment behavior of borrowers. We implement an experimental credit market in which loan repayment is not third-party enforceable. We then compare market outcome with a public credit registry to that without a credit registry. This experiment is conducted for two market environments: first, a market in which repeat interaction between borrowers and lenders is not feasible and, second, a market in which borrowers and lenders can choose to trade repeatedly with each other. In the market without repeat interaction the credit market collapses without a credit registry, as lenders rightly fear that borrowers will default. The introduction of a registry in this environment significantly raises repayment rates and the credit volume extended by lenders. When repeat transactions are possible a credit registry is not necessary to sustain high market performance as relationship banking enforces repayment even when lenders cannot share information. In this environment credit reporting has little impact on market efficiency, it does however affect trading structure and distribution. The presence of a credit registry leads to fewer banking relationships and reduces the ability of lenders to extract rents from such relationships.Credit Market, Information Sharing, Relationship Banking

Camera Surveillance as a Measure of Counterterrorism?

Camera surveillance has recently gained prominence in policy proposals on combating terrorism. We evaluate this instrument of counterterrorism as resting on the premise of a deterrence effect. Based on comparative arguments and previous evidence on crime, we expect camera surveillance to have a relatively smaller deterrent effect on terrorism than on other forms of crime. In particular, we emphasize opportunities for substitution (i.e., displacement effects), the interaction with media attention aspired to by terrorists, the limits of real-time interventions, the crowding-out of social surveillance, the risk of misguided profiling, and politico-economic concerns regarding the misuse of the technology.Camera surveillance, closed-circuit television (CCTV), public security, deterrence, terrorism

A Proof of the Isoenergetic KAM-Theorem from the “Ordinary” One

A proof is given of the isoenergetic KAM-theorem for Hamiltonian systems, using the “ordinary” KAM-theorem and a transversality argument.

Camera Surveillance as a Measure of Counterterrorism?

Camera surveillance has recently gained prominence in policy proposals on combating terrorism. We evaluate this instrument of counterterrorism as resting on the premise of a deterrence effect. Based on comparative arguments and previous evidence on crime, we expect camera surveillance to have a relatively smaller deterrent effect on terrorism than on other forms of crime. In particular, we emphasize opportunities for substitution (i.e., displacement effects), the interaction with media attention aspired to by terrorists, the limits of real-time interventions, the crowding-out of social surveillance, the risk of misguided profiling, and politico-economic concerns regarding the misuse of the technology.Camera surveillance, closed-circuit television (CCTV), public security, deterrence, terrorism.

Sc-Smoothness, Retractions and New Models for Smooth Spaces

We survey a (nonlinear) Fredholm theory for a new class of ambient spaces called polyfolds, and develop the analytical foundations for some of the applications of the theory. The basic feature of these new spaces, which can be finite and infinite dimensional, is that in general they may have locally varying dimensions. These new spaces are needed for a functional analytic treatment of nonlinear problems involving analytic limiting behavior like bubbling-off. The theory is applicable to Gromov-Witten and Floer Theory as well as Symplectic Field Theory.Comment: 178 pages, 8 figure