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Empirical Analysis of Rosca Auctions in a South Indian Village

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  • Stefan Klonner

Abstract

A 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.

Suggested Citation

  • Stefan Klonner, 2003. "Empirical Analysis of Rosca Auctions in a South Indian Village," Working Papers 854, Economic Growth Center, Yale University.
  • Handle: RePEc:egc:wpaper:854
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    References listed on IDEAS

    as
    1. Siwan Anderson & Jean-Marie Baland, 2002. "The Economics of Roscas and Intrahousehold Resource Allocation," The Quarterly Journal of Economics, Oxford University Press, pages 963-995.
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    3. Laffont, Jean-Jacques & Ossard, Hervé & Vuong, Quang, 1991. "Econometrics of First-Price Auctions," IDEI Working Papers 7, Institut d'Économie Industrielle (IDEI), Toulouse.
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    5. Besley, Timothy & Coate, Stephen & Loury, Glenn, 1993. "The Economics of Rotating Savings and Credit Associations," American Economic Review, American Economic Association, pages 792-810.
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    8. Handa, Sudhanshu & Kirton, Claremont, 1999. "The economics of rotating savings and credit associations: evidence from the Jamaican 'Partner'," Journal of Development Economics, Elsevier, pages 173-194.
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    11. Engelbrecht-Wiggans Richard, 1994. "Auctions with Price-Proportional Benefits to Bidders," Games and Economic Behavior, Elsevier, vol. 6(3), pages 339-346, May.
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    More about this item

    Keywords

    Roscas; Auctions;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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