Empirical Analysis of Rosca Auctions in a South Indian Village
AbstractA bidding rotating savings and credit association (Rosca) is modeled as a sequence of symmetricindependent-private-value auctions with price-proportional benefits to bidders. We estimate a structural econometric model which, by introducing an altruistic component into each bidder's utility function, allows for socially favorable deviations from the private information, nonaltruistic bidding equilibrium. We find that bidding is more altruistic in groups managed by experienced organizers and in Roscas whose current members have already run through more than one Rosca cycle of the current group, implying that effective leadership and enduring relationships help mitigate the social cost of strategic behavior. When a bidder has to meet an unforeseen expenditure and this information is public, bidders act more altruistically than when information is private and the Rosca funds are used for investment, indicating reciprocal risk sharing among Rosca participants.
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Bibliographic InfoPaper provided by Economic Growth Center, Yale University in its series Working Papers with number 854.
Length: 44 pages
Date of creation: Apr 2003
Date of revision:
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- G20 - Financial Economics - - Financial Institutions and Services - - - General
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