Working Paper: CEPR ID: DP9531
Authors: Rocco Macchiavello; Ameet Morjaria
Abstract: This paper provides evidence on the importance of reputation, intended as beliefs buyers hold about seller's reliability, in the context of the Kenyan rose export sector. A model of reputation and relational contracting is developed and tested. We show that 1) the value of the relationship increases with the age of the relationship; 2) during an exogenous negative supply shock sellers prioritize relationships consistently with the predictions of the model; and 3) reliability at the time of the shock positively correlates with future survival and relationship value. Models exclusively focusing on enforcement or insurance considerations cannot account for the evidence.
Keywords: Exports; Relational Contracts; Reputation
JEL Codes: C73; D23; L14; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| age of relationship (J12) | value of relationship (D46) |
| post-election violence (K16) | sellers prioritize established relationships (L14) |
| reliability at time of shock (C41) | future survival of relationships (J12) |
| reliability at time of shock (C41) | relationship value (D46) |