Anonymous credit

Wang, Chien-Chiang and Li, Yiting (2023): Anonymous credit.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: credit, digital currencies, search, imperfect information
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers

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