Publication

This publication estimates the presence and importance of adverse selection and moral hazard in a consumer credit market using a field experiment methodology. The authors find evidence of moral hazard and weaker evidence for adverse selection. The publication further on suggests that perhaps 7 to 16 percent of default is due to asymmetric information problems. Asymmetric information may help explain the prevalence of credit constraints even in a market that specializes in financing high-risk borrowers at very high rates.