Debt rescheduling with multiple lenders : relying on the information of others

Are loans with multiple lenders rescheduled more or less often than single-lender loans? Do multiple lenders react efficiently to new information? Our analysis emphasizes the role of the precision of information: lenders trade-off benefits from immediate foreclosure against expected benefits of waiting for other lenders to act, given the likelihood that the other lenders’ information be more precise. We analyze a Bayesian game where signals distributed to lenders may differ in precision and content. Equilibria display excessive liquidation or excessive rescheduling, depending on the likelihood of information. Outcomes are nevertheless second-best, given the constraint that private information cannot be merged.