Citation

Discussion Paper Details

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Title: The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports

Author(s): Rocco Macchiavello and Ameet Morjaria

Publication Date: June 2013

Keyword(s): exports, relational contracts and reputation

Programme Area(s): Development Economics, Industrial Organization and International Trade and Regional Economics

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.

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Bibliographic Reference

Macchiavello, R and Morjaria, A. 2013. 'The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9531