To pay or not to pay: a model of international defaults

Daniel F. Kohler

Expert InsightsPublished 1984

This paper develops a model that explains why some international borrowers find it in their interest to refuse or delay honoring their repayment obligations. It explores the incentives faced by the borrowers--the potential return on payment, rescheduling, or default, and the likelihood that the lender will grant a rescheduling. It then derives lender strategies aimed at changing these incentives. The author concludes that it may be in the lender's interest to let some borrowers default, even though the costs of this action seem to outweigh its benefits when considered in isolation.

Document Details

  • Copyright: RAND Corporation
  • Availability: Web Only
  • Year: 1984
  • Pages: 23
  • Document Number: P-7024

Citation

Chicago Manual of Style

Kohler, Daniel F., To pay or not to pay: a model of international defaults. Santa Monica, CA: RAND Corporation, 1984. https://www.rand.org/pubs/papers/P7024.html.
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