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If Borrowers with the Most Risky Investment Projects Seek Bank

question 137

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If borrowers with the most risky investment projects seek bank loans in higher proportion to those borrowers with the safest investment projects,banks are said to face the problem of


Definitions:

Biologically Based

Pertains to characteristics or processes that are rooted in biological factors, including genetic, neurological, or physiological origins.

Looking-Glass Self

The concept that individuals develop self-images based on how they believe others perceive them.

Worse than Average Effect

The cognitive bias where individuals undervalue their own qualities and abilities in comparison to others.

Social Comparison Theory

A theory positing that individuals determine their own social and personal worth based on how they stack up against others.

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