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Randomized Entry: The Equilibrium Effects of Entry in Digital Financial Markets

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  • Francis Annan

Abstract

We created randomized variation across and within markets to estimate the equilibrium effects of small microenterprises’ entry into a new market: the market for mobile money services. Entry has a negative net effect on firm misconduct in mobile money. There is a positive direct effect but a similar-sized negative indirect effect on prices for non-financial goods/services. Market-level price-cost markups decreased, indicating net gains in consumer surplus. We find evidence of within-market revenue reallocation for mobile money, and a large services multiplier: revenues for non-financial goods/services increased by 20%. We show the improvements come from adoption externalities and decreased transaction costs.

Suggested Citation

  • Francis Annan, 2024. "Randomized Entry: The Equilibrium Effects of Entry in Digital Financial Markets," NBER Working Papers 33134, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33134
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    More about this item

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G50 - Financial Economics - - Household Finance - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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