Abstract
The perverse effect of joint liability (JL) refers to a situation where borrowers under individual liability (IL) would repay but do not do so under JL. To counteract that negative effect of JL the literature suggests more flexible lending schemes like implicit joint liability ([DQFG16]) or optimised partial joint liability ([All16]). I claim that the perverse effect is an artefact of a too rigid punishment function and I show how it disappears with adaptive punishment.
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© 2020 Springer Fachmedien Wiesbaden GmbH, part of Springer Nature
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Prem, C. (2020). Perverse effect of joint liability vanishes with adaptive punishment. In: The Theory of Credit Contracts. Springer Gabler, Wiesbaden. https://doi.org/10.1007/978-3-658-29362-8_10
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DOI: https://doi.org/10.1007/978-3-658-29362-8_10
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Publisher Name: Springer Gabler, Wiesbaden
Print ISBN: 978-3-658-29361-1
Online ISBN: 978-3-658-29362-8
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