Rai, A. and Sjostrom, T. (2010) Redesigning Microcredit. In: Vulkan, N., Roth, A.E. and Neeman, Z., Eds., The Handbook of Market Design, Published to Oxford Scholarship Online: January 2014, Chapter 9.

has been cited by the following article:

• TITLE: The Role of Group Size and Correlated Project Outcomes in Group Lending

  AUTHORS: Marina Markheim

  KEYWORDS: Microfinance, Group Lending, Strategic Default, Group Size, Correlated Credit Risk

  JOURNAL NAME: Theoretical Economics Letters, Vol.7 No.5, July 21, 2017

  ABSTRACT: This paper analyzes contract efficiency with regard to correlated project realization and the size of the borrowers in group lending. Firstly, I show that under the standard assumption of independent project payoffs, the expected group cost of default decreases with group size. Secondly, I show that small groups can also optimize group efficiency if individual payoffs and credit risks are correlated. The results outline that social cost minimization occurs due to a common interest in forming optimal borrower groups between lenders and borrowers.