Randomized Entry: The Equilibrium Effects of Entry in Digital Financial Markets
We created randomized variation across and within markets to estimate the equilibrium effects of small microenterprises’ entry into a new market: the market for mobile money services. Entry has a negative net effect on firm misconduct in mobile money. There is a positive direct effect but a similar-sized negative indirect effect on prices for non-financial goods/services. Market-level price-cost markups decreased, indicating net gains in consumer surplus. We find evidence of within-market revenue reallocation for mobile money, and a large services multiplier: revenues for non-financial goods/services increased by 20%. We show the improvements come from adoption externalities and decreased transaction costs.
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Copy CitationFrancis Annan, "Randomized Entry: The Equilibrium Effects of Entry in Digital Financial Markets," NBER Working Paper 33134 (2024), https://doi.org/10.3386/w33134.
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