Do Banks Extract Informational Rents through Collateral?

Correlated information, mechanism design and informational rents

The optimal mechanism literature shows that the principal can extract all the equilibrium payoffs at a given Bayesian Game when the players’ information is correlated. For this result to hold, the principal needs to know how informative are the agents’ signals. If the principal does not know how noisy the signal of a player is, or equivalently, when the signals available to a player can be rank...

Informational Rents and Discretionary Industrial Assistance

The paper analyses the existence and efficiency of discretionary industrial assistance schemes under asymmetric information between an uninformed government and a uniform distribution of firms with differing productivities. Discretionary assistance allows the government to scrutinise projects in an effort to learn the type, which can reduce the ‘informational rents’ of automatic assistance, whe...

Did Nonpar Banks Earn Economic Rents ?

The payment functions of central banks vary among nations. Some central banks provide only limited payment services, such as issuing and redeeming currency and facilitating settlement among members of payments systems by transferring reserve balances.1 In the United States, the Federal Reserve has been a provider of payment services since the early 1900s. By 1918, the Fed had acquired a large s...

Informational Rents in Bargaining with Serially Correlated Valuations

Informational smallness and the scope for limiting information rents

For an incomplete-information model of public-good provision with interim participation constraints, we show that e¢ cient outcomes can be approximated, with approximately full surplus extraction, when there are many agents and each agent is informationally small. The result holds even if agents’ payo¤s cannot be unambiguously inferred from their beliefs, i.e., even if the so-called BDP propert...