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

Casaburi, Lorenzo and Macchiavello, Rocco (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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Identification Number: 10.1257/aer.20180281

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: 04 Dec 2019 00:14
URI: http://eprints.lse.ac.uk/id/eprint/100180

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