The role of Microfinance in alleviating poverty and enhancing social development is increasing. However, Microfinance Institutions (MFIs) suffer from two important problems which undermine their growth. The first one is inherent to their exposure to information asymmetry (adverse selection and...

This paper presents empirical evidence which at first glance appears to show that firms are not pricing to maximize profits. We then present a model to explain how this behavior is in fact optimal when we account for additional constraints faced by firms in certain product markets.