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

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  • Macchiavello, Rocco
  • Morjaria, Ameet

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 Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9531.

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Date of creation: Jun 2013
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Handle: RePEc:cpr:ceprdp:9531

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Keywords: exports; relational contracts; reputation;

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References

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Cited by:
  1. Marta Troya-Martinez, 2013. "Vertical Relational Contracts and Trade Credit," Economics Series Working Papers 648, University of Oxford, Department of Economics.
  2. Jonas Hjort, 2013. "Ethnic Divisions and Production in Firms," CESifo Working Paper Series 4449, CESifo Group Munich.

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