Optimal Lending Contracts with Retrospective and Prospective Bias

J. Aislinn Bohren, Daniel N. Hauser

Tutkimustuotos: LehtiartikkeliConference articleScientific

Abstrakti

Model misspecification is a common approach to model belief formation distortions. Misspecified models can be decomposed into two classes of distortions: prospective and retrospective biases (Bohren and Hauser 2023). Prospective biases correspond to distortions in forecasting future beliefs, while retrospective biases correspond to distortions in interpreting information ex post. We disentangle the impact of these two distortions on optimal lending contracts in the context of an entrepreneur who borrows to invest in a project. The entrepreneur learns about project quality from a signal, which she interprets with a misspecified model. A lender leverages each form of bias in distinct ways.
AlkuperäiskieliEnglanti
Sivut665-672
JulkaisuAEA Papers and Proceedings
Vuosikerta113
DOI - pysyväislinkit
TilaJulkaistu - 1 toukok. 2023
OKM-julkaisutyyppiB3 Vertaisarvioimaton artikkeli konferenssijulkaisussa
TapahtumaAmerican Economic Association Annual Meeting - New Orleans, Yhdysvallat
Kesto: 6 tammik. 20238 tammik. 2023

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