An Experimental Analysis Of the Demand For Payday Loans

The payday loan industry is one of the fastest growing segments of the consumer financial services market in the United States. We design an environment similar to the one that payday loan customers face and then conduct a laboratory experiment to examine what effect, if any, the existence of payday loans has on individuals\u27 abilities to manage and to survive financial setbacks. Our primary objective is to examine whether access to payday loans improves or worsens the likelihood of financial survival in our experiment. We also test the degree to which people\u27s use of payday loans affects their ability to survive financially. We find that payday loans help the subjects to absorb expenditure shocks and therefore survive financially. However, subjects whose demand for payday loans exceeds a certain threshold level are at a greater risk than a corresponding subject in the treatment in which payday loans do not exist

Takeovers and horizontal mergers: Policy and performance.

The dissertation examines takeovers and horizontal mergers, considering whether or not current policy seems appropriate. Focus lies on both predicted and actual market performance effects. Horizontal mergers are investigated in a product market context and takeovers in an asset market environment. Horizontal mergers. The horizontal merger research is concerned with the relationship of industry concentration and anticompetitive market outcomes. Historically, economists treat concentration and competitive performance as inversely related, and the Department of Justice Merger Guidelines (DOJMG) continue to do so in the screening of mergers to be challenged. Laboratory analysis allows for direct control of variables such as market definition, scale economies, barriers to entry and concentration, thus permitting tests of the potential tradeoff of anticompetitive outcomes and production efficiency due to merger. The experimental design takes both the DOJMG and economic theory into account. When the merged firm enjoys economies of scale, the merger is observed to have a significant impact on industry performance, namely in the competitive direction. The data suggest that if the antitrust authorities rely on the Herfindahl-Hirshman Index (HHI) as measured by sales as opposed to capacity they inappropriately increase the number of cases to be challenged. It remains to be seen whether or not a more useful predictor of the anticompetitive effects of mergers exists. The data indicate that the HHI based on capacity accompanied by an alteration of the policy demarcation line would improve measurement of the effect. Takeovers. The takeover study focuses on two buyout policies, the tender offer and market takeover. The latter policy represents a prohibition of tender offers, but with acquisition attempts permitted via the asset market. Investment and operating skills of management are controlled for by holding profitability of the target firm constant. Laboratory analysis incorporates treatments of certain versus uncertain dividend values. Results suggest that shareholder value added (SVA) is greater when an acquisition is attempted than in its absence, regardless of takeover method or its success. SVA associated with the tender offer and market treatments do not vary significantly under both the uncertain and certain dividend value treatments

Dividend timing and behavior in laboratory asset markets

This paper investigates the effect of dividend timing on price bubbles and endogenous expectations in twenty-six laboratory asset markets. In ten "A1" markets, a single dividend is paid at the end of the trading horizon. In nine "A2" markets, dividends are paid at the end of each trading period. In seven "A3" markets, some of the dividends are paid at the end of the trading horizon, and the rest are paid on a per-period basis. The results indicate that price bubbles are most likely in A2 markets, less likely in A3 markets, and least likely in A1 markets. Six distinct hypotheses are considered. The data suggest that the concentration of dividend value at a single point in time helps to create common expectations, and thus significantly reduce the incidence of bubbles. Also, the results underscore the difficulty facing econometric tests on field data where fundamental value has to be approximated.Price bubbles, Asset market experiments, Expectations.

Dividend Timing and Behavior in Laboratory Asset Markets

This paper investigates the effect of dividend timing on price bubbles and endogenous expectations in twenty-six laboratory asset markets. In ten A1 markets, a single dividend is paid at the end of the trading horizon. In nine A2 markets, dividends are paid at the end of each trading period. In seven A3 markets, some of the dividends are paid at the end of the trading horizon, and the rest are paid on a per-period basis. The results indicate that price bubbles are most likely in A2 markets, less likely in A3 markets, and least likely in A1 markets. Six distinct hypotheses are considered. The data suggest that the concentration of dividend value at a single point in time helps to create common expectations, and thus significantly reduce the incidence of bubbles. Also, the results underscore the difficulty facing econometric tests on field data where fundamental value has to be approximated

An Experimental Analysis of the Demand for Payday Loans

The payday loan industry is one of the fastest growing segments of the consumer financial services market in the United States. The purpose of our study is to design an environment similar to the one that payday loan customers face. We then conduct a laboratory experiment to examine what effect, if any, the existence of payday loans has on individuals\u27 abilities to manage and to survive financial setbacks. Our primary objective is to examine whether access to payday loans improves or worsens the likelihood of survival in our experiment. We also test the degree to which people\u27s use of payday loans affects their ability to survive financial shocks. We find that payday loans help the subjects to absorb expenditure shocks and, therefore, survive. However, subjects whose demand for payday loans exceeds a certain threshold level are at a greater risk than a corresponding subject in the treatment in which payday loans do not exist

An Experimental Analysis of the Demand for Payday Loans

The payday loan industry is one of the fastest growing segments of the consumer financial services market in the United States. We design an environment similar to the one that payday loan customers face and then conduct a laboratory experiment to examine what effect, if any, the existence of payday loans has on individuals abilities to manage and to survive financial setbacks. Our primary objective is to examine whether access to payday loans improves or worsens the likelihood of financial survival in our experiment. We also test the degree to which peoples use of payday loans affects their ability to survive financially. We find that payday loans help the subjects to absorb expenditure shocks and therefore survive financially. However, subjects whose demand for payday loans exceeds a certain threshold level are at a greater risk than a corresponding subject in the treatment in which payday loans do not exist.