Behavioral biases in trade credit policy: does it matter for financial performance?

Notes for Credit, Growth, and Trade Policy∗

We consider a multi-sector Ricardo-Viner model of an economy in which factor mobility is inhibited by a credit market imperfection and use it to address a number of standard questions in trade theory. Opening the economy to trade will tend to increase inequality in a poor country (understood as one with badly developed credit market institutions). Trade volume between poor and rich countries ma...

Credit Policy in times of Financial Distress

This essay evaluates two central bank policy tools, capital requirements and lending of last resort, designed to avert financial panics in the context of endowment economies with complete markets and limited borrower commitment. Credit panics are self-fulfilling shocks to expected credit conditions which cause transitions from an optimal but fragile steady state to a suboptimal state with zero ...

Trade Credit versus Bank Credit during Financial Crises

EOQ Model for Delayed Deteriorating Items with Shortages and Trade Credit Policy

This paper deals with a deterministic inventory model for deteriorating items under the condition of permissible delay in payments with constant demand rate is a function of time which differs from before and after deterioration for a single item. Shortages are allowed and completely backlogged which is a function of time. Under these assumptions, this paper develops a retailer's model for obta...

Behavioral biases and investor performance

Research indicates that individual investors trade excessively and underperform the market indices, Barber and Odean (2000). The purpose of this paper is to help explain which behavioral biases, if any, can explain this result using a simulation approach. Results indicate that putting too much weight on the current environment, anchoring, is the largest factor in explaining individual investor ...