Losers distribution, with applications to financial inclusion

EasyChair Preprint 1855

Abstract

In this paper I develop the new ``Losers Distribution'' and use it to build a financial instrument which partially solves the problem of financial exclusion. I design compensated lotteries that can mobilize and circulate the savings of people who do not participate in formal financial markets. The lottery which I propose entirely avoids problems of information assymetry, default risk, and ethnic and gender discrimination in lending. I use the losers distribution to set lottery ticket prices so that only the financially excluded participate and to calculate the subsidy needed to sustain the lottery. I show that the lottery subsidy rate is low when compared to the subsidies of typical microfinance programs about the world.

Keyphrases: Financial Exclusion, Financial Market Failure, Lottery Game, Pascal triangle, Poverty, compensated lottery, compensated lottery game, default risk, fair lottery, financial instrument, formal financial market, formal market, income distribution, inequality, loser distribution, lotteries, lottery club, lottery ticket price, multinomial coefficient, probability mass function, proper partition, sample space

@booklet{EasyChair:1855,
  author    = {John Edwards},
  title     = {Losers distribution, with applications to financial inclusion},
  howpublished = {EasyChair Preprint 1855},
  year      = {EasyChair, 2019}}