Positive Profits in Competitive Credit Markets With Adverse Selection

2020 ◽  
Author(s):  
Dan Bernhardt ◽  
Kostas Koufopoulos ◽  
Giulio Trigilia
Keyword(s):  
Adverse Selection ◽  
Credit Markets

scholarly journals Information Asymmetries in Consumer Credit Markets: Evidence from Payday Lending

2013 ◽  
Vol 5 (4) ◽  
pp. 256-282 ◽  
Author(s):  
Will Dobbie ◽  
Paige Marta Skiba
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Regression Discontinuity ◽  
Credit Markets ◽  
Consumer Credit ◽  
Probability Of Default ◽  
Information Asymmetries ◽  
Payday Lending ◽  
Loan Market ◽  
Payday Loans

Information asymmetries are prominent in theory but difficult to estimate. This paper exploits discontinuities in loan eligibility to test for moral hazard and adverse selection in the payday loan market. Regression discontinuity and regression kink approaches suggest that payday borrowers are less likely to default on larger loans. A $50 larger payday loan leads to a 17 to 33 percent drop in the probability of default. Conversely, there is economically and statistically significant adverse selection into larger payday loans when loan eligibility is held constant. Payday borrowers who choose a $50 larger loan are 16 to 47 percent more likely to default. (JEL D14, D82, G21)

Multiple borrowing and adverse selection in credit markets

2017 ◽  
Vol 70 (1) ◽  
pp. 286-299 ◽  
Author(s):  
Eric Van Tassel
Keyword(s):  
Adverse Selection ◽  
Credit Markets
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