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Banks reduce the free-rider problem in information production by a
Banks reduce the free-rider problem in information production by a. charging others for information about the financial condition of potential borrowers. b. buying tradable securities with their depositors funds. c. buying information from firms that specialize in gathering information about smaller borrowers, such as Standard and Poor's and Moody's. d. making private nontraded loans so other lenders cannot benefit from the information they have collected about the borrower.
Expert Solution
Answer
d .
Explanation
The correct option is D "making private, nontraded loans so other lenders cannot benefit from the information they have collected about the borrower". Banks reduce the? free-rider problem in information production by making private, nontraded loans so other lenders cannot benefit from the information they have collected about the borrower.
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