During the Great Recession, many homeowners around the world owed more on their houses than they were
Question:
During the Great Recession, many homeowners around the world owed more on their houses than they were worth. Often, U.S. borrowers who cannot meet their mortgage payments can give their houses to the banks that hold their mortgage without declaring bankruptcy or being held accountable for any unpaid balance. However, Europeans, who face tougher bankruptcy laws, are responsible for unpaid mortgage balances even after losing their homes (Gabriele Steinhauser and Matthew Dalton, “Lingering Bad Debts Stifle Europe Recovery,” Wall Street Journal, January 31, 2013). Using a decision tree, show that Americans are more likely to buy houses than Europeans, all else the same.
Step by Step Answer:
Managerial Economics and Strategy
ISBN: 978-0134167879
2nd edition
Authors: Jeffrey M. Perloff, James A. Brander