The value of relationships: evidence from a supply shock to Kenyan rose exports

Macchiavello, Rocco ORCID: 0009-0007-5465-3153 and Morjaria, Ameet (2015) The value of relationships: evidence from a supply shock to Kenyan rose exports. American Economic Review, 105 (9). pp. 2911-2945. ISSN 0002-8282

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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.

Item Type:	Article
Official URL:	https://www.aeaweb.org/journals/aer
Additional Information:	© 2015 American Economic Association
Divisions:	Management
Subjects:	H Social Sciences > HF Commerce
JEL classification:	D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships; Contracts and Reputation; Networks 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 > O19 - International Linkages to Development; Role of International Organizations Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture > Q17 - Agriculture in International Trade
Date Deposited:	01 Nov 2016 16:32
Last Modified:	12 Dec 2024 01:01
URI:	http://eprints.lse.ac.uk/id/eprint/68207

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