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Competition, Kinship or Reciprocity? Village Experiments in Alternative Modes of Exchange

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  • Subramanian, Arjunan
  • Qaim, Matin
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    Abstract

    In this paper, detailed data on transactions in a village commodity market are used to explain the puzzle of sluggish agricultural supply response. We show that existence of reciprocity among sellers exhibits multiple equilibria and creates trade diversion. Large volumes of the commodity are sold to a trader who does not offer the best price, but on whom sellers depend through transactions in other markets. An implication of this trader-idiosyncratic effect on supply is that policies that affect prices may result in different supply responses.

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    File URL: http://purl.umn.edu/25434
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    Bibliographic Info

    Paper provided by International Association of Agricultural Economists in its series 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia with number 25434.

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    Date of creation: 2006
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    Handle: RePEc:ags:iaae06:25434

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    Web page: http://www.iaae-agecon.org/
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    Related research

    Keywords: Reciprocity; Kinship; Neighborhood effects; Trader idiosyncrasy; Equilibrium; Consumer/Household Economics;

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    1. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
    2. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
    3. Case, A.C. & Katz, L.F., 1991. "The Company You Keep: The Effects Of Family And Neighborhood On Disadvantaged Younths," Harvard Institute of Economic Research Working Papers 1555, Harvard - Institute of Economic Research.
    4. Avinash Dixit, 2003. "Trade Expansion and Contract Enforcement," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1293-1317, December.
    5. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
    6. Fehr, Ernst & Kirchsteiger, Georg & Riedl, Arno, 1995. "Gift Exchange and Reciprocity in Competitive Experimental Markets," Economics Series 14, Institute for Advanced Studies.
    7. Hoff, Karla & Sen, Arijit, 2005. "The kin system as a poverty trap?," Policy Research Working Paper Series 3575, The World Bank.
    8. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
    9. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
    10. Akerlof, George A, 1976. "The Economics of Caste and of the Rat Race and Other Woeful Tales," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 599-617, November.
    11. Deshingkar, Priya & Johnson, Craig & Farrington, John, 2005. "State transfers to the poor and back: The case of the Food-for-Work program in India," World Development, Elsevier, vol. 33(4), pages 575-591, April.
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