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Capacity-constrained Collusive Price Discrimination in the Informal Rural Credit Markets of Nepal

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  • Magnus Hatlebakk

Abstract

The author tests two alternative models of price determination in informal rural credit markets, using LSMS data from Nepal. Strong support is found for a capacity-constrained collusive oligopoly model, where lenders have full information about actual borrowers and charge heterogeneous interest rates. Only marginal support is found for a competitive cost-pricing model with imperfect information. Interest rates vary with the observable characteristics of caste, installment period, and geographical region; and they decrease as village lending capacity increases up to a certain level. Interest rates do not depend on risk related variables such as land value and loan size. Copyright � 2008 The Author. Journal compilation � 2008 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Development Economics.

Volume (Year): 13 (2009)
Issue (Month): 1 (02)
Pages: 70-86

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Handle: RePEc:bla:rdevec:v:13:y:2009:i:1:p:70-86

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669

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Cited by:
  1. Magnus Hatlebakk, 2012. "Son-preference, number of children, education and occupational choice in rural Nepal," CMI Working Papers 8, CMI (Chr. Michelsen Institute), Bergen, Norway.
  2. Vegard Iversen & Adriaan Kalwij & Arjan Verschoor & Amaresh Dubey, 2010. "Caste dominance and economic performance in rural India," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 10-01, Indian Statistical Institute, New Delhi, India.
  3. Aryal, Jeetendra P. & Holden, Stein T., 2011. "Caste, Land and Labor Market Imperfections, and Land Productivity in Rural Nepal," CLTS Working Papers 6/11, Centre for Land Tenure Studies, Norwegian University of Life Sciences.
  4. Magnus Hatlebakk, 2012. "Myopic preferences or subsistence income? Why do rickshaw cyclists rent the cycle?," CMI Working Papers 1, CMI (Chr. Michelsen Institute), Bergen, Norway.
  5. Magnus Hatlebakk, 2012. "Poverty dynamics in rural Orissa: Transitions in assets and occupations over generations," CMI Working Papers 11, CMI (Chr. Michelsen Institute), Bergen, Norway.

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