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A Model of Bidding in Rotating Saving Credit Associations
Abstract: The paper analyzes bidding behavior in discount bidding Roscas under the assumption of risk neutrality. Roscas are group based revolving financial schemes. In discount bidding Roscas, individuals bid for a lumpsum. We find that bids submitted by members in equilibrium are increasing in the returns or opportunities for investment. Further, members submit lower bids when credit is available outside Rosca at expensive rates. A bidding Rosca is efficient as an …
Published in Journal of Production Research & Management · Vol. 7, Issue 1, 2017 · pp. 11–15 Read article