The value of relationships: Evidence from a supply shock to kenyan rose exports

Rocco MacChiavello, Ameet Morjaria

Research output: Contribution to journalReview articlepeer-review

46 Scopus citations

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's reputation is defined by buyer's beliefs about seller's reliability. We show that (i) due to lack of enforcement, the volume of trade is constrained by the value of the relationship; (ii) the value of the relationship increases with the age of the relationship; and (iii) during an exogenous negative supply shock deliveries are an inverted-U shaped function of relationship's age. Models exclusively focusing on enforcement or insurance considerations cannot account for the evidence.

Original languageEnglish (US)
Pages (from-to)2911-2945
Number of pages35
JournalAmerican Economic Review
Volume105
Issue number9
DOIs
StatePublished - Sep 1 2015

ASJC Scopus subject areas

  • Economics and Econometrics

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