Individuals’ inability to coordinate investment may significantly constrain economic development. In this paper we study a simple investment game characterized by multiple equilibria and ask whether an income-based incentive scheme can uniquely implement the high investment outcome. A general...

Microfinance institutions and other lenders in developing countries rely on the promise of future loans to induce repayment. However, if borrowers expect that others will default, and so loans will no longer be available in the future, then they will default as well. We refer to such contagion...