Discharge of residual debt—Do private and institutional lenders differ?

Oliver Kirchkamp and Henning Prömpers

With the help of lab experiments we study the impact of discharging insolvent debtors of their residual debt. We investigate the impact of different participation rules and the impact of different types of lenders. We find that higher participation rates encourage risk taking behaviour of borrowers. Higher participation rates also reduce the amount of moonlighting. Most importantly, institutional lenders can suffer more from moonlighting than private lenders.

JEL-Classification: C92, D14, D82, D86

Keywords: lab experiment, insolvency, moonlighting, institutional lenders

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• Here is the current version of the paper as a PDF.

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Supplementary material

Real effort task

In the experiment we use a real effort task where participants have to count the number of 1s in a matrix of 1s and 0s:

• Here is the z-Tree program for the task.
• Here is the z-Tree program as a text file for the task.

Please feel free to use the program for your research (if you take it, we would not mind a brief reference to our paper).

Alternative task

In the experiment we also allow participants to surf the internet instead. To store this information we use the table where we otherwise store the answers from the real effort task, TNantworten. Before we have defined in globals the following constant:

firefox = 1001;

Now we create a button (with the label »surf the internet«) which contains the following two items:

program{
	table = subjects;
	do{
		TNantworten.new{
		  Subject = :Subject;
		  einsen = ::firefox;
		  zeit = gettime();
		    stufe=1;
		}
	}
}
externalprogram{
	runonclient = TRUE;
	startnewprogram = TRUE;
	commandline = "/usr/bin/firefox";
}

The first program makes sure that we remember which subject and when pushed the button. We abuse the variable einsen which would otherwise store the number of counted 1s and store here the constant firefox which contains an otherwise unused value.

The second part (externalprogram) starts the internet browser.

At the end of the period, participants reach a stage which informs them about their profit. In this stage we also call the following program:

externalprogram{
	runonclient = TRUE;
	startnewprogram = TRUE;
	commandline = "~/endfun1.sh";
}

where endfun1.sh is a script this simply does the following:

#!/bin/bash
ps -A | grep firefox-bin
if [ $? -eq 0 ]; then
	zenity --warning --text="All participants have now finished their tasks.
           Your browser window will close in 10 seconds." &
fi
sleep 10
killall firefox-bin