In‐kind credit provision through contract farming and formal credit markets

Contract Pricing in Consumer Credit Markets∗

We study pricing and contract design in the subprime auto sales market. We develop a model of the demand for financed purchases that incorporates both adverse selection and moral hazard effects, and estimate the model using detailed transactionlevel data. We use the model to quantify selection and repayment problems and show that different contracting terms, in particular car price and required...

The Economics of Contract Farming: A Credit and Investment Perspective∗

Supplement to “ Contract Pricing in Consumer Credit Markets

This appendix provides a more detailed analysis of a parameterized version of the consumer model presented in Section 4.1. We first describe our parameterization of the model. Second, we illustrate some of the theoretical properties of the model and show that the model can incorporate several important features observed in our data. In particular, the model allows for adverse selection (borrowe...

SUPPLEMENT TO “ CONTRACT PRICING IN CONSUMER CREDIT MARKETS ” ( Econometrica

HERE WE PRESENT the likelihood function used to estimate the parameters of the demand model. The model can be thought of as a system of four “standard” equations: (i) a tobit down payment equation (with censoring at the minimum down), (ii) a probit purchase equation, (iii) a tobit repayment equation (with censoring at full payment or at the end of our sample), and (iv) a linear price negotiatio...

Money , Markets and Dynamic Credit ∗

This paper presents an integrated theory of money and dynamic credit. I study financial intermediation when both the intermediary and individuals have private information. I show that money is essential in solving the two-sided incentive problems under the dynamic credit arrangement. First, requiring settlement with money can induce market trades that generate information-revealing prices to di...