This paper analyzes the interaction between the success of group lending institutions and the stock of social capital (modeled by the level of trust) in the community where the group lending programs are located. Agents play a finitely repeated “trust game” in parallel with a finitely...

This paper contributes to the literature on endogenous preferences by showing that, when income is close to the minimum required for subsistence, individuals rationally will behave as if they were risk averse. It is suggested that observed risk aversion in empirical studies can be explained by...

This note reconsiders a theoretical result asserted to explain the success of group lending programs in LDCs. It has been claimed that if groups are allowed to form themselves, risky and safe borrowers will sort themselves into relatively homogenous groups. This positive assortative matching can...