Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/123482
Authors: 
Fall, François
Nguyen-Huu, Thanh Tam
Year of Publication: 
2015
Series/Report no.: 
Economics Discussion Papers 2015-66
Abstract: 
In Hotelling's fundamental model (1929), the geographical distance and high transportation costs grant firms present in a market a certain power over local buyers in their neighborhoods. Starting from his model, this study shows that in the competition between a bank and a microfinance institution (MFI), geographical distance and transportation costs alone are no longer sufficient for attributing market power to the firms present. In fact, the introduction of psychological distance and education level in the model alter the Hotelling's results. Psychological proximity (trust) and the educational level of the client play determinant roles in dividing the credit market between a bank and an MFI.
Subjects: 
spatial competition
bank
microfinance
market power
JEL: 
G21
O17
C72
D43
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Working Paper

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