Moral hazard and nonexclusive contracts

We study equilibria for economies with hidden action in environments in which the agents ' contractual relationships with competing financial intermediaries cannot be monitored (or are not contractible upon). We fully characterize equilibrium allocations and contracts for such economies, as well as discuss their welfare properties. Depending on the parameters of the economy, either the optimal action choice is not sustained in equilibrium or, if it is, agents necessarily enter into multiple contractual relationships and intermediaries make positive profits, even under free-entry conditions. The main features and implications of these environments are consistent with several stylized facts of markets for unsecured loans.