Project riskiness and credit rationing:-
Consider the basic, fixed-investment model (the investment is I, the entrepreneur borrows I -A; the probability of success is pH (no private benefit) or pL = pH - ?p (private benefit B), success (failure) yields verifiable profit R (respectively 0)). There are two variants, "A" and "B," of the projects, which differ only with respect to "riskiness":
so project B is "riskier." The investment cost is the same for both variants and, furthermore,
Which variant is less prone to credit rationing?