Models of shrouding predict that firms lack incentives to compete on add-on prices. Working with a large Turkish bank to test SMS direct marketing promotions to 108,000 existing checking account holders, we find that messages promoting a large discount on the overdraft interest rate reduce...

We examine a randomized trial that allows separate identification of peer screening and enforcement of credit contracts. A South African microlender offered half its clients a bonus for referring a friend who repaid a loan. For the remaining clients, the bonus was conditional on loan approval....

Identifying the impacts of liquidity shocks on spending decisions is difficult methodologically but important for theory, practice, and policy. Using seven different methods on microenterprise loan applicants, we find striking results. Borrowers report uses of loan proceeds strategically, and...

Theory and evidence have raised concerns that microcredit does more harm than good, particularly when offered at high interest rates. We use a clustered randomized trial, and household surveys of eligible borrowers and their businesses, to estimate impacts from an expansion of group lending at...

Theory and evidence have raised concerns that microcredit does more harm than good, particularly when offered at high interest rates. We use a clustered randomized trial, and household surveys of eligible borrowers and their businesses, to estimate impacts from an expansion of group lending at...

Evidence on the effectiveness of financial education and formal savings account access is lacking, particularly for youth. We randomly assign 250 youth clubs to receive either financial education, access to a cheap group account, or both. The financial education treatments increase financial...

Local network externalities are present when the utility of buying from a firm not only depends on the number of other customers (global network externalities), but also on their identity and/or characteristics. We explore the consequences of local network externalities within a framework where...

In an important paper, Aghion and Bolton (1987) argue that a buyer and a seller may agree on high liquidation damages in order to extract rents from future suppliers. As this may distort future trade, it may be socially wasteful. We argue that Aghion and Bolton's analysis is incomplete in some...

Do firms have the right incentives to innovate in the presence of productivity spillovers? This paper proposes an explicit model of spillovers through labor flows in a framework with search frictions. Firms can choose to innovate or to imitate by hiring a worker from a firm that has already...