Demand and supply of infrequent payments as a commitment device: evidence from Kenya

Casaburi, Lorenzo and Macchiavello, Rocco ORCID: 0009-0007-5465-3153 (2019) Demand and supply of infrequent payments as a commitment device: evidence from Kenya. American Economic Review, 109 (2). pp. 523-555. ISSN 0002-8282

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Abstract

Despite extensive evidence that preferences are often time-inconsistent, there is only scarce evidence of willingness to pay for commitment. Infrequent payments for frequently provided goods and services are a common feature of many markets and they may naturally provide commitment to save for lumpy expenses. Multiple experiments in the Kenyan dairy sector show that: (i) farmers are willing to incur sizable costs to receive infrequent payments as a commitment device, (ii) poor contract enforcement, however, limits competition among buyers in the supply of infrequent payments. We then present a model of demand and supply of infrequent payments and test its additional predictions.

Item Type:	Article
Official URL:	https://www.aeaweb.org/journals/aer
Additional Information:	© 2019 American Economic Association.
Divisions:	Management
Subjects:	H Social Sciences > HC Economic History and Conditions S Agriculture > S Agriculture (General)
JEL classification:	K - Law and Economics > K1 - Basic Areas of Law > K12 - Contract Law L - Industrial Organization > L6 - Industry Studies: Manufacturing > L66 - Food; Beverages; Cosmetics; Tobacco O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture; Natural Resources; Energy; Environment; Other Primary Products O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements: Legal, Social, Economic, and Political Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture > Q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture > Q13 - Agricultural Markets and Marketing; Cooperatives; Agribusiness
Date Deposited:	06 Mar 2019 00:11
Last Modified:	12 Dec 2024 01:41
URI:	http://eprints.lse.ac.uk/id/eprint/100180

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