Wednesday, January 16, 2013

18 January 2013: Incentives and Competition in Micro-finance

Kaniska Dam
Center for Research and Teaching in Economics(CIDE), Mexico City

We analyze a model where micro-finance institutions (MFIs) offer repayment-based incentive contracts to the credit agents whose principal task is to gather information regarding a borrower by exerting costly monitoring efforts. Monitoring by one agent benefits the other, and hence there is externality across contractual relationships. The agents may collude with the borrower by taking bribes, and hide information. We show that, under competition, collusion possibility increases, individual monitoring efforts are lower. Competition may lead to more high-powered incentives relative to a situation where there is a single MFI. We further show that when the monitoring technology is submodular (log-supermodular) in the individual monitoring efforts, optimal monitoring efforts and incentives are strategic substitutes (complements).

Date: January 18, 2013
Time: 11:30 A.M.

Seminar Room 2
Indian Statistical Institute Delhi Centre,
7, S. J. S. Sansanwal Marg,
New Delhi-110016 (INDIA)


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