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

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  • Subramanian, Arjunan
  • Qaim, Matin

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.

Suggested Citation

  • Subramanian, Arjunan & Qaim, Matin, 2006. "Competition, Kinship or Reciprocity? Village Experiments in Alternative Modes of Exchange," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25434, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaae06:25434
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    References listed on IDEAS

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    10. 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.
    11. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-851, September.
    12. Avinash Dixit, 2003. "Trade Expansion and Contract Enforcement," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1293-1317, December.
    13. Hoff, Karla & Sen, Arijit, 2005. "The kin system as a poverty trap?," Policy Research Working Paper Series 3575, The World Bank.
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