<p>This thesis seeks to provide an extensive theoretical framework for the potential incentive</p><p>effects from debt relief. The objective is achieved by integrating the positive incentive</p><p>model by Krugman with a negative incentive framework developed by drawing on the</p><p>theories of a soft budget constraint. The analysis shows that the existence of bailouts</p><p>offers the possibility that debt relief can produce negative incentives for the debtor</p><p>instead of positive incentives for improved performance. Taking on a game theoretical</p><p>perspective suggests that strategic behavior in the interaction between the debtor and the</p><p>creditor can increase the likelihood of a specific incentive effect to prevail. Such an</p><p>interactive game also highlights the importance for the creditor to obtain reliable</p><p>information about the behavior of the debtor.</p>
| Identifer | oai:union.ndltd.org:UPSALLA/oai:DiVA.org:uu-6394 |
| Date | January 2006 |
| Creators | Larnemark, Martin |
| Publisher | Uppsala University, Department of Economics, Uppsala : Nationalekonomiska institutionen |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, text |
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