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| Author: | Inderst, R. |
| Title: | "Irresponsible lending" with a better informed lender |
| Journal: | Economic Journal
2008 : OCT, VOL. 118:532, p. 1499-1519 |
| Index terms: | information loans personal finance |
| Language: | eng |
| Abstract: | This study presents a simple model of personal finance in which an incumbent lender has an information advantage vis-a-vis both potential competitors and households. A lender with sufficient market power may engage in "irresponsible" lending, approving credit even if this is knowingly against a household's best interest, in order to extract more consumer surplus. Unless rival lenders are equally well informed, competition may reduce welfare. |
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