Welfare‐improving adverse selection in credit markets
构建了竞争性信贷市场中逆向选择与道德风险并存的理论模型，发现逆向选择可能通过优质借款人对劣质借款人的交叉补贴提高总体福利，抵消投资扭曲的损失。
A model of simultaneous adverse selection and moral hazard in a competitive credit market is developed and used to show that aggregate borrower welfare may be higher in the combined case than in the moral‐hazard‐only case. Adverse selection can be welfare improving because in the pooling equilibrium of the combined model, high‐quality borrowers cross subsidize low‐quality borrowers. The cross subsidization reduces the overall moral hazard effort effects, and the resulting gain in welfare may more than offset the welfare loss stemming from distorted investment choices. The analysis focuses on pooling equilibria because model structure precludes separating equilibria.