APPENDIX
Proof of Proposition 1
The condition for a solution to the CA’s problem is
ψ = n-1 (1 + δ) - 2(1 - C) < 0. (27)
For θ> 0 it is also necessary that
κ = n-1 (1 + δ) - 1 + c< 0. (28)
Higher monitoring costs and default risk reduces the CA’s profit because
∂ Π* ∂δ |
= <1 ‘¢2 K 2πT < 0 (1 +δ)2ψ2 |
(29) | |
and | |||
∂ Π* d πnpv |
(1 — c )κ τ = -ə-----½2πτ < 0. t(1 +δ)ψ2 |
(30) | |
∂c |
The agent’s profit is increased since
∂π* ∂C = |
n — 1 (1 — |
c) (1 + δ) τ -----4 4∏τ > 0, |
(31) | |
and |
1 — c ¢2 τ --ɪ4πτ > 0. ψ3 | |||
∕9τΓ* dπNPV |
n—1 ( _ _ _ (n + 1)2 |
(32) | ||
∂δ |
The debt finally is reduced due to an increase in the monitoring costs
and default risk because
dDebt (⅛)2 + (l+δ)2,∩ c,2, τ f.
(33)
(34)
~∂i~ = (-----ψ3-----)(1 - tt )2π < 0,
and
dDebt n — 1 2 (1 — C )(1 + δ) τ
—— = (----)2ʌ---1-^3----22πT < 0.
∂c n +1 tψ3
27
More intriguing information
1. The name is absent2. The name is absent
3. Review of “From Political Economy to Economics: Method, the Social and Historical Evolution of Economic Theory”
4. Initial Public Offerings and Venture Capital in Germany
5. The name is absent
6. Consumption Behaviour in Zambia: The Link to Poverty Alleviation?
7. The resources and strategies that 10-11 year old boys use to construct masculinities in the school setting
8. How Offshoring Can Affect the Industries’ Skill Composition
9. Notes on an Endogenous Growth Model with two Capital Stocks II: The Stochastic Case
10. Accurate and robust image superresolution by neural processing of local image representations