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Please note that all times are shown in the time zone of the conference. The current conference time is: 8th June 2024, 07:09:09pm EDT
Session Chair: Jillian Grennan, UC-Berkeley Discussant: Mina Lee, Federal Reserve Board
Location:Room 610
Presentations
Borrowing from a Bigtech Platform
Jian Jane Li1, Stefano Pegoraro2
1Columbia University; 2University of Notre Dame, Mendoza College of Business
We model competition between banks and a bigtech platform that lend to a merchant with private information and subject to moral hazard. By controlling access to a valuable marketplace for the merchant, the platform enforces partial loan repayments, thus alleviating financing frictions, reducing the risk of strategic default, and contributing to welfare positively. Credit markets become partially segmented, with the platform targeting merchants of low and medium perceived credit quality. However, conditional on observables, the platform lends to better borrowers than banks because bad borrowers self-select into bank loans to avoid the platform's enforcement, causing negative welfare effects in equilibrium.