Information Preference and Credit Allocation in a Bazaar Economy

Traders operating in informal economies tend to use nonaccounting metrics in their credit allocation decisions. By using a combination of survey questions and a hypothetical choice experiment, we explore wholesalers’ preferences for retailers’ accounting information and, importantly, the reasons for its limited use. Based on estimates of wholesalers’ willingness to pay for retailer information, we find that, although wholesalers continue to value nonaccounting information such as retailers’ community membership and relationship length, wholesalers also overwhelmingly value sales and profits in making credit decisions. However, wholesalers do not use accounting information because it is perceived to be unreliable, and retailers do not share this information because it might be misused. Our findings suggest that improving the reliability of accounting information and preventing its misuse will increase the use of such information in credit allocation in informal markets. This paper was accepted by Eric So, accounting. Funding: R. E. Tomy gratefully acknowledges the support of the Kathryn and Grant Swick Faculty Research Fund at the University of Chicago Booth School of Business. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.04197