Bifurcations in business profitability: An agent-based simulation of homophily in self-financing groups

Formal financial institutions inadequately distribute startup capital to business ventures of ethnic minorities, women, low-educated, and young people. Self-financing groups fill this gap because in these associations agents accumulate their savings into a fund that is later used provide loans the members. This study builds simulates an agent-based model compares profitability businesses started by members self-financing against financed commercial loans. The results indicate that—besides self-generation debt capital—businesses can have higher returns due consolidation social competitive advantage created through dual process homophily. Higher quotas boost profits, but only up threshold, after which bifurcation pattern—typical complexity dynamics—emerges. practical theoretical implications findings are discussed future research lines proposed.