This paper explores how the credit card interest rate interacts with the parameters
such as, permanent default probability, temporal delinquency probability with
eventual paying off the outstanding balance in full, benefit for the cardholders,
administrative cost to the credit card companies, and the effect of collusion under
the presence of adverse selection. Contrary to the model proposed by Ausubel and in
contrast with the one developed by Brito and Hartley, we develop a formal adverse
selection model for the credit card while assuming consumer rationality, and we
propose several policy recommendations from the supplier’s perspective. The
current analysis sheds light on the relationship of the several relevant parameters
to the real interest rate and its effect on the profitability of credit card
industry as a whole.
학회소식
공지사항
[2003년 제 2차] A Theory of Credit Card Market: Adverse Selection v
작성자 : 관리자
조회수 : 787
게시일 :
2003-07-12
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