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Anonymous credit

Author

Listed:
  • Wang, Chien-Chiang
  • Li, Yiting

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.

Suggested Citation

  • Wang, Chien-Chiang & Li, Yiting, 2023. "Anonymous credit," MPRA Paper 118480, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:118480
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    File URL: https://mpra.ub.uni-muenchen.de/119255/8/MPRA_paper_119255.pdf
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    References listed on IDEAS

    as
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    5. Nosal, Ed & Wallace, Neil, 2007. "A model of (the threat of) counterfeiting," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 994-1001, May.
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    7. Ahnert, Toni & Hoffmann, Peter & Monnet, Cyril, 2022. "Payments and privacy in the digital economy," CEPR Discussion Papers 17313, C.E.P.R. Discussion Papers.
    8. Li, Yiting & Rocheteau, Guillaume, 2011. "On The Threat Of Counterfeiting," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S1), pages 10-41, April.
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    More about this item

    Keywords

    credit; digital currencies; search; imperfect information;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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