Competition and Altruism in Microcredit Markets
AbstractWe analyze the effects of entry in a previously monopolistic microcredit market characterized by asymmetric information and by institutions that offer only one type of contract. We consider different behavioral assumptions concerning the Incumbent and study their influence on equilibrium predictions. We show that competition leads to contract differentiation but can make borrowers worse off. Moreover, the screening process creates a previously unexplored source of rationing. We show that if the incumbent institution is altruistic, rationing is reduced and that this can positively affect the competitor's profit.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number 2008_037.
Length: 40 p.
Date of creation: 2008
Date of revision:
Publication status: Published by:
Microfinance; Competition; Altruism; Differentiation; Credit Rationing;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-18 (All new papers)
- NEP-COM-2008-11-18 (Industrial Competition)
- NEP-CTA-2008-11-18 (Contract Theory & Applications)
- NEP-DEV-2008-11-18 (Development)
- NEP-MFD-2008-11-18 (Microfinance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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