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The relevance of a rules-based maize marketing policy : an experimental case study of Zambia

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Author Info
Abbink, Klaus
Jayne, Thomas S.
Moller, Lars C.

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Abstract

Strategic interaction between public and private actors is increasingly recognized as an important determinant of agricultural market performance in Africa and elsewhere. Trust and consultation tend to positively affect private activity while uncertainty of government behavior impedes it. This paper reports on a laboratory experiment based on a stylized model of the Zambian maize market. The experiment facilitates a comparison between discretionary interventionism and a rules-based policy in which the government pre-commits itself to a future course of action. A simple precommitment rule can, in theory, overcome the prevailing strategic dilemma by encouraging private sector participation. Although this result is also borne out in the economic experiment, the improvement in private sector activity is surprisingly small and not statistically significant due to irrationally cautious choices by experimental governments. Encouragingly, a rules-based policy promotes a much more stable market outcome, thereby substantially reducing the risk of severe food shortages. These results underscore the importance of predictable and transparent rules for the state's involvement in agricultural markets.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4727.

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Date of creation: 01 Sep 2008
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Handle: RePEc:wbk:wbrwps:4727

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Keywords: Markets and Market Access; Food&Beverage Industry; Public Sector Corruption&Anticorruption Measures; Food Security; Access to Markets;

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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.:
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  4. David Tschirley & Jan J. Nijhoff & Pedro Arlindo & Billy Mwinga & Michael T. Weber & T.S. Jayne, 2006. "Anticipating and Responding to Drought Emergencies in Southern Africa: Lessons from the 2002-2003 Experience," International Development Working Papers 89, Department of Agricultural Economics, Michigan State University. [Downloadable!]
  5. Offerman, Theo & Potters, Jan & Sonnemans, Joep, 2002. "Imitation and Belief Learning in an Oligopoly Experiment," Review of Economic Studies, Blackwell Publishing, vol. 69(4), pages 973-97, October.
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  6. Huck, Steffen & Muller, Wieland & Normann, Hans-Theo, 2001. "Stackelberg Beats Cournot: On Collusion and Efficiency in Experimental Markets," Economic Journal, Royal Economic Society, vol. 111(474), pages 749-65, October. [Downloadable!] (restricted)
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  7. KLAUS ABBINK & MOLLER, Lars Christian & SARAH O’HARA, 2005. "The Syr Darya River Conflict: An Experimental Case Study," Discussion Papers 2005-14, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham. [Downloadable!]
  8. Fehr, Ernst & Kirchsteiger, George & Riedl, Arno, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 437-59, May. [Downloadable!] (restricted)
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  10. Nijhoff, J.J. & Tschirley, David & Jayne, T.S. & Tembo, Gelson & Arlindo, Pedro & Mwiinga, Billy & Shaffer, James D. & Weber, Michael & Donovan, Cynthia & Boughton, Duncan, 2003. "Coordination for Long-Term Food Security by Government, Private Sector and Donors: Issues and Challenges," Food Security III Papers 11319, Michigan State University, Department of Agricultural, Food, and Resource Economics. [Downloadable!]
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  11. Daniel Haile & Abdolkarim Sadrieh & Harrie A. A Verbon, 2006. "Cross-Racial Envy and Underinvestment in South Africa," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  12. Abbink, Klaus & Irlenbusch, Bernd & Renner, Elke, 2000. "The moonlighting game: An experimental study on reciprocity and retribution," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 265-277, June. [Downloadable!] (restricted)
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  15. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2004. "Two are few and four are many: number effects in experimental oligopolies," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 435-446, April. [Downloadable!] (restricted)
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  16. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 1999. "Learning in Cournot Oligopoly--An Experiment," Economic Journal, Royal Economic Society, vol. 109(454), pages C80-95, March. [Downloadable!] (restricted)
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  17. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July. [Downloadable!] (restricted)
  18. Douglass C. North, 1994. "Institutions and Credible Commitment," Economic History 9412002, EconWPA. [Downloadable!]
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(explanations, 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.)

  1. Klaus Abbink & T.S. Jayne & Lars C. Moller, 2007. "The Benefits Of A Rules-Based Maize Marketing Policy: Results Of An Experimental Study Of Zambia," International Development Collaborative Policy Briefs ZM-FSRP-PB-29, Department of Agricultural Economics, Michigan State University. [Downloadable!]
  2. Jones Govereh & T.S. Jayne & A. Chapoto, 2008. "Assessment Of Alternative Maize Trade And Market Policy Interventions In Zambia," International Development Collaborative Working Papers ZM-FSRP-WP-33, Department of Agricultural Economics, Michigan State University. [Downloadable!]
    Other versions:
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