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- Title
The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports<sup>†</sup>.
- Authors
Macchiavello, Rocco; Morjaria, Ameet
- 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. (JEL D86, F14, L14, O13, O19, Q17)
- Subjects
REPUTATION; CUT flower export &; import trade; ROSE industry; ECONOMIC shock; BUSINESS networks; KENYAN economy; PURCHASING agents; CUT flower industry; MATHEMATICAL models; ECONOMICS
- Publication
American Economic Review, 2015, Vol 105, Issue 9, p2911
- ISSN
0002-8282
- Publication type
Article
- DOI
10.1257/aer.20120141