This paper analyzes costly favoritism related to physical attractiveness and gender in bank loan markets using a market structure-based method. The rationale is that a concentrated market provides more space for loan officers to discriminate against a certain group of borrowers. Using several...

This paper shows that market fragility and mass default can arise in microcredit markets as a result of the strategic interaction between a microlender using a reputation-based mechanism and a traditional lender using physical collateral. In our model, borrowers solve a dynamic programming...