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Reciprocity and Exclusion in Informal Financial Institutions: An Experimental Study of Rotating Savings and Credit Associations

Author

Listed:
  • Shimpei Koike

    (Department of Value and Decision Science, Tokyo Institute of Technology)

  • Mayuko Nakamaru

    (Department of Value and Decision Science, Tokyo Institute of Technology)

  • Tokinao OTAKA

    (Department of Social Engineering, Tokyo Institute of Technology)

  • Hajime Shimao

    (Department of Value and Decision Science, Tokyo Institute of Technology)

  • Ken-Ichi Shimomura

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

  • Takehiko Yamato

    (Department of Social Engineering, Tokyo Institute of Technology)

Abstract

Rotating savings and credit associations (Roscas) are worldwide informal financial institutions, in which all participants contribute to a fund and one of them receives it in rotation. A crucial problem is that participants have incentives to default on contributing after receiving the fund. We conducted an experiment and found that Roscas were sustained using a rule of excluding defaulters from the group by voting. We observed that group members behave reciprocally and revengefully: a member contributed (or did not contribute) to the fund of other members who had (or had not) contributed to theirs. This voluntary behavior sustained Roscas.

Suggested Citation

  • Shimpei Koike & Mayuko Nakamaru & Tokinao OTAKA & Hajime Shimao & Ken-Ichi Shimomura & Takehiko Yamato, 2015. "Reciprocity and Exclusion in Informal Financial Institutions: An Experimental Study of Rotating Savings and Credit Associations," Discussion Paper Series DP2015-31, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2015-31
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    References listed on IDEAS

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    Cited by:

    1. Alice Solda & Marie Claire Villeval, 2020. "Exclusion And Reintegration In A Social Dilemma," Economic Inquiry, Western Economic Association International, vol. 58(1), pages 120-149, January.

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    More about this item

    Keywords

    Rosca; Exclusion; Reputation; Reciprocity; Punishment;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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