• Media type: E-Article
  • Title: The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports
  • Contributor: Macchiavello, Rocco; Morjaria, Ameet
  • imprint: American Economic Association, 2015
  • Published in: The American Economic Review
  • Language: English
  • ISSN: 0002-8282
  • Origination:
  • Footnote:
  • Description: <p>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.</p>