Anonymous credit

Chien-Chiang Wang and Yiting Li

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies credit using a search-theoretic model with anonymity in which traders cannot reveal their true identities to the public but can create transaction accounts as identities to borrow and store their trade histories. A transaction account that is used to borrow would be excluded from future transactions as a punishment when default occurs, but a defaulter can create a new account to trade again. We show that increasing-credit-limit schemes connected to account ages, as captured by accumulated repayment records, emerges endogenously to ensure debt repayment. We extend the model to consider a situation in which a trader may create multiple accounts to borrow and default intentionally. Requiring that proof of a deterrence activity is provided when an account is created can help deter multi-account fraud and enhance the lifetime value of traders.

Keywords: credit; digital currencies; search; imperfect information (search for similar items in EconPapers)
JEL-codes: D83 E40 E51 (search for similar items in EconPapers)
Date: 2023-03-06
New Economics Papers: this item is included in nep-dge and nep-pay
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https://mpra.ub.uni-muenchen.de/118480/1/Anonymous_Credit_20230306.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/119255/8/MPRA_paper_119255.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:118480

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