Skip to main content

Perverse effect of joint liability vanishes with adaptive punishment

  • Chapter
  • First Online:
The Theory of Credit Contracts
  • 252 Accesses

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.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 39.99
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 54.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Christian Prem .

Rights and permissions

Reprints and permissions

Copyright information

© 2020 Springer Fachmedien Wiesbaden GmbH, part of Springer Nature

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

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

Download citation

  • DOI: https://doi.org/10.1007/978-3-658-29362-8_10

  • Published:

  • Publisher Name: Springer Gabler, Wiesbaden

  • Print ISBN: 978-3-658-29361-1

  • Online ISBN: 978-3-658-29362-8

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics