How does lending-market competitiveness shape new firms’ financing? Using a unique U.S. representative panel of new firms, we document that in more concentrated local lending markets: (a) new firms are less likely to access credit; (b) new firms have lower leverage; and (c) the best-performing firms are more severely affected by reduced debt financing. We develop a contingent-claims model with monopolistically competitive banks that rationalizes these facts and shows how credit-market conditions determine loan fees and concentration. Our findings highlight banks’ market power as a channel through which the financial sector influences firms’ development and, hence, economic growth.

We isolate the information channel of peer effects in consumption in a setting that excludes a role for common shocks or social pressure—a spending panel paired with crowdsourced information about anonymous “peers” elicited at different times. Consumers converge to peers’ spending, and more so when peer signals are more informative. Convergence is asymmetric: within 12 months of information provision, overspenders close 17% and underspenders 5% of their gap relative to peers. We exploit the quasi-random assignment to peer groups in an instrumental-variable strategy and implement an experiment for external validity. Our results are consistent with information-based theories of overconsumption.