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http://hdl.handle.net/10419/26977
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| Title: | | Microfinance games  |
| Authors: | | Giné, Xavier Jakiela, Pamela Karlan, Dean S. Morduch, Jonathan |
| Issue Date: | | 2006 |
| Series/Report no.: | | Center discussion paper // Economic Growth Center 936 |
| Abstract: | | Microfinance has been heralded as an effective way to address imperfections in credit markets. From a theoretical perspective, however, the success of microfinance contracts has puzzling elements. In particular, the group-based mechanisms often employed are vulnerable to free-riding and collusion, although they can also reduce moral hazard and improve selection. We created an experimental economics laboratory in a large urban market in Lima, Peru and over seven months conducted eleven different games that allow us to unpack microfinance mechanisms in a systematic way. We find that risk-taking broadly conforms to predicted patterns, but that behavior is safer than optimal. The results help to explain why pioneering microfinance institutions have been moving away from group-based contracts. The work also provides an example of how to use framed field experiments as a methodological bridge between laboratory and field experiments. |
| Subjects: | | microfinance group lending information asymmetries contract theory experimental economics |
| JEL: | | O12 D92 D10 D21 D82 C93 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Center Discussion Papers, Economic Growth Center (EGC), Yale University
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