Loyalty, exit, and enforcement: evidence from a Kenya Dairy Cooperative

Casaburi, Lorenzo and Macchiavello, Rocco (2015) Loyalty, exit, and enforcement: evidence from a Kenya Dairy Cooperative. American Economic Review, 105 (5). pp. 286-290. ISSN 0002-8282

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Abstract

Organizations depend on members' "loyalty" for their success. Studying a cooperative's attempt to increase deliveries by members, we show that the threat of sanctions leads to highly heterogeneous response among members. Despite the cooperative not actually enforcing the threatened sanctions, positive effects for some members persist for several months. Other members "exit," stopping delivering altogether. Among non-compliant members we document substantial heterogeneity in beliefs about the legitimacy of the sanctions. This lack of common understanding highlights the role played by managers in organizations and provides a candidate explanation for lack of sanctions enforcement documented by Ostrom (1990) and other studies.

Item Type:	Article
Official URL:	https://www.aeaweb.org/journals/aer
Additional Information:	© 2015 American Economic Association
Library of Congress subject classification:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HF Commerce
Journal of Economic Literature Classification System:	D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture; Natural Resources; Energy; Environment; Other Primary Products P - Economic Systems > P1 - Capitalist Systems > P13 - Cooperative Enterprises Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture > Q13 - Agricultural Markets and Marketing; Cooperatives; Agribusiness
Sets:	Departments > Management
Date Deposited:	03 Nov 2016 10:49
URL:	http://eprints.lse.ac.uk/68218/

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