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Philip T. Hoffman, Gilles Postel-Vinay, and Jean-Laurent Rosenthal

Print publication date: 2019

Print ISBN-13: 9780691182179

Published to Princeton Scholarship Online: May 2019

DOI: 10.23943/princeton/9780691182179.001.0001

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PRINTED FROM PRINCETON SCHOLARSHIP ONLINE (www.princeton.universitypressscholarship.com). (c) Copyright Princeton University Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in PRSO for personal use.date: 26 February 2020

Prices Return

Prices Return

Chapter:
(p.195) Chapter 8 Prices Return
Source:
Dark Matter Credit
Author(s):

Philip T. Hoffman

Gilles Postel-Vinay

Jean-Laurent Rosenthal

Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691182179.003.0009

This chapter considers the transition to a new equilibrium in 1899 by reviewing some economics literature that deals with three different issues that arise in the transition from a single-price equilibrium to a range of prices. The first suggests that when there is substantial asymmetric information, price competition in credit markets may be reduced, if not eliminated, in favor of credit rationing. Next, the chapter studies why the equilibrium in a credit rationing market may feature a single interest rate. Finally, it examines a third approach that analyzes conditions under which such pooling equilibria may unravel. This economics literature helps shed light on the transition from the near universal five-percent interest rate equilibrium to a regime with a distribution of rates in the late nineteenth century.

Keywords:   economics literature, single-price equilibrium, price ranges, price competition, credit markets, credit rationing

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