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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>