TY  - JOUR
AU  - Hart,Oliver
AU  - Moore,John
TI  - Default and Renegotiation: A Dynamic Model of Debt
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5907
PY  - 1997
Y2  - January 1997
UR  - http://www.nber.org/papers/w5907
L1  - http://www.nber.org/papers/w5907.pdf
N1  - Author contact info:
Oliver D. Hart
Department of Economics
Littauer Center 220
Harvard University
Cambridge, MA 02138
Tel: 617/496-3461
Fax: 617-495-7730
E-Mail: ohart@harvard.edu

John Moore
William Robertson Building
Edinburgh
Scotland, EH8 9JY
U.K.
E-Mail: j.h.moore@ed.ac.uk
AB  - We analyze the role of debt in persuading an entrepreneur to pay out cash flows, rather than to divert them.  In the first part of the paper we study the optimal debt contract -- specifically, the trade-off between the size of the loan and the repayment -- under the assumption that some debt contract is optimal.  In the second part we consider a more general class of (non-debt) contracts, and derive sufficient conditions for debt to be optimal among these.
ER  -