Which variant is less prone to credit rationing

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Reference no: EM131248351

Project riskiness and credit rationing:-

Consider the basic, fixed-investment model (the investment is I, the entrepreneur borrows I -A; the probability of success is pH (no private benefit) or p_L = p_H - ?_p (private benefit B), success (failure) yields verifiable profit R (respectively 0)). There are two variants, "A" and "B," of the projects, which differ only with respect to "riskiness":

so project B is "riskier." The investment cost is the same for both variants and, furthermore,

Which variant is less prone to credit rationing?

Reference no: EM131248351

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