Advanced Search
MyIDEAS: Login to save this article or follow this journal

Spontaneous Market Emergence

Contents:

Author Info

  • Fafchamps Marcel

    ()
    (Department of Economics, Oxford University)

Abstract

Drawing insights from the literature and from the author's own survey work on contractual practices among manufacturers and traders in Africa, we study the transition from anonymous to personal to impersonal exchange. Using a dynamic game with heterogenous agents and information sharing, we derive precise conditions under which relational contracting spontaneously emerges and deters opportunistic breach even in the absence of formal market institutions. Exclusion of cheaters is not required for contracting to begin. As exchange develops, newcomers may be excluded from contracting when screening costs are high and agents long lived. Reputational equilibria in which cheaters are permanently excluded are not decentralizable unless contracting is already developed and breach of contract is interpreted as a sign of impending bankruptcy.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.degruyter.com/view/j/bejte.2002.2.issue-1/bejte.2002.2.1.1045/bejte.2002.2.1.1045.xml?format=INT
Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 2 (2002)
Issue (Month): 1 (June)
Pages: 1-37

as in new window
Handle: RePEc:bpj:bejtec:v:topics.2:y:2002:i:1:n:2

Contact details of provider:
Web page: http://www.degruyter.com

Order Information:
Web: http://www.degruyter.com/view/j/bejte

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. McMillan, John & Woodruff, Christopher, 1999. "Dispute Prevention without Courts in Vietnam," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 637-58, October.
  2. Ellison, Glenn, 1994. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 567-88, July.
  3. Marcel Fafchamps & Bart Minten, 2000. "Returns to Social Network Capital among Traders," Development Working Papers 145, Centro Studi Luca d\'Agliano, University of Milano.
  4. Ghosh, Parikshit & Ray, Debraj, 1996. "Cooperation in Community Interaction without Information Flows," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 491-519, July.
  5. Marcel Fafchamps & Jan Willem Gunning & Remco Oostendorp, 1999. "Inventories and risk in African manufacturing," CSAE Working Paper Series 1999-19, Centre for the Study of African Economies, University of Oxford.
  6. Himbara, David, 1994. "The failed Africanization of commerce and industry in Kenya," World Development, Elsevier, vol. 22(3), pages 469-482, March.
  7. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  8. Kali, Raja, 1999. "Endogenous Business Networks," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 615-36, October.
  9. Marris, Peter, 1971. "African Businessmen in a Dual Economy," Journal of Industrial Economics, Wiley Blackwell, vol. 19(3), pages 231-45, July.
  10. Montgomery, James D, 1991. "Social Networks and Labor-Market Outcomes: Toward an Economic Analysis," American Economic Review, American Economic Association, vol. 81(5), pages 1407-18, December.
  11. Fafchamps, Marcel & Minten, Bart, 1998. "Relationships and traders in Madagascar," MTID discussion papers 24, International Food Policy Research Institute (IFPRI).
  12. Kandori, Michihiro, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 63-80, January.
  13. Eric Rasmusen, 1995. "``Stigma and Self-Fulfilling Expectations of Criminality''," Law and Economics 9506001, EconWPA.
  14. McMillan, John & Woodruff, Christopher, 1998. "Inter-Firm Relationships and Informal Credit in Vietnam," CEPR Discussion Papers 2036, C.E.P.R. Discussion Papers.
  15. Bernstein, Lisa, 1992. "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," The Journal of Legal Studies, University of Chicago Press, vol. 21(1), pages 115-57, January.
  16. Fafchamps, Marcel, 1997. "Trade credit in Zimbabwean manufacturing," World Development, Elsevier, vol. 25(5), pages 795-815, May.
  17. Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
  18. Simon Johnson & John McMillan & Christopher Woodruff, 2000. "Entrepreneurs and the Ordering of Institutional Reform: Poland, Slovakia, Romania, Russia and Ukraine Compared," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(1), pages 1-36, March.
  19. Fafchamps, Marcel, 1996. "The enforcement of commercial contracts in Ghana," World Development, Elsevier, vol. 24(3), pages 427-448, March.
  20. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
  21. Lang, William W. & Nakamura, Leonard I., 1990. "The dynamics of credit markets in a model with learning," Journal of Monetary Economics, Elsevier, vol. 26(2), pages 305-318, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Durlauf, Steven N. & Fafchamps, Marcel, 2005. "Social Capital," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 26, pages 1639-1699 Elsevier.
  2. Abigail Barr & Marcel Fafchamps & Trudy Owens, 2004. "The Resources and Governance of Non-Governmental Organizations in Uganda," CSAE Working Paper Series 2004-06, Centre for the Study of African Economies, University of Oxford.
  3. Nienke Oomes, 2002. "Local Trade Networks and Spatially Persistent Unemployment," International Trade 0211004, EconWPA.
  4. Fali Huang, 2006. "The Transition from Relational to Legal Contract Enforcement," Working Papers 23-2006, Singapore Management University, School of Economics.
  5. Jain, Tarun & Sood, Ashima, 2012. "How does relationship-based governance accommodate new entrants? Evidence from the cycle rickshaw rental market," MPRA Paper 37424, University Library of Munich, Germany.
  6. Kono, Hisaki, 2006. "Employment with connections: Negative network effects," Journal of Development Economics, Elsevier, vol. 81(1), pages 244-258, October.
  7. Joshua Charap & Jelena Pavlovic, 2009. "Development of the Commercial Banking System in Afghanistan," IMF Working Papers 09/150, International Monetary Fund.
  8. Yann Bramoullé & Sanjeev Goyal, 2009. "Favoritism," Cahiers de recherche 0941, CIRPEE.
  9. Marcus Noland, 2003. "Religion, Culture, and Economic Performance," Working Paper Series WP03-8, Peterson Institute for International Economics.
  10. Marcel Fafchamps, 2004. "Social Capital and Development," Economics Series Working Papers 214, University of Oxford, Department of Economics.
  11. Barr, Abigail & Fafchamps, Marcel & Owens, Trudy, 2005. "The governance of non-governmental organizations in Uganda," World Development, Elsevier, vol. 33(4), pages 657-679, April.
  12. Marcel Fafchamps & Marco J. van der Leij, 2006. "Scientific Networks and Co-authorship," Economics Series Working Papers 256, University of Oxford, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:topics.2:y:2002:i:1:n:2. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.