Abstract

This paper demonstrates that ex post bailouts prompted by a noncontractible signal of output can lead to ex ante tacit collusion. The possibility of being bailed out whenever they fail can decrease the incentives of agents to do a good job in the first place.

Citation

Arya, A., and Jonathan Glover. "Bailouts and Unwanted Coordination." Journal of Accounting, Auditing, and Finance 21, no. 1 (2006): 109-117.

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