皇冠体育app Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports

This paper develops and tests a model of reputation and relational contracting

From:
Foreign, Commonwealth & Development Office
Published
1 January 2015
Country:
Kenya
Document Type:
Journal Article
皇冠体育appme:
Economic Growth
First published:
1 January 2015
Authors:
Macchiavello, R. and Morjaria, A.

Abstract

This paper provides evidence on the importance of reputation in the context of the Kenyan rose export sector. A model of reputation and relational contracting is developed and tested. A seller鈥檚 reputation is defined by buyer鈥檚 beliefs about seller鈥檚 reliability. 皇冠体育app authors show that:

  1. due to lack of enforcement, the volume of trade is constrained by the value of the relationship

  2. the value of the relationship increases with the age of the relationship;

  3. during an exogenous negative supply shock deliveries are an inverted-U shaped function of relationship鈥檚 age. Models exclusively focusing on enforcement or insurance considerations cannot account for the evidence.

Citation

Macchiavello, R.; Morjaria, A. 皇冠体育app Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports. American Economic Review (2015) 105 (9) 2911-2945. [DOI: 10.1257/aer.20120141]

Updates to this page

Published 1 January 2015
Contents