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Demand and supply of infrequent payments as a commitment device: evidence from Kenya

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  • Casaburi, Lorenzo
  • Macchiavello, Rocco

Abstract

Despite extensive evidence that preferences are often time-inconsistent, there is only scarce evidence of willingness to pay for commitment. Infrequent payments for frequently provided goods and services are a common feature of many markets and they may naturally provide commitment to save for lumpy expenses. Multiple experiments in the Kenyan dairy sector show that: (i) farmers are willing to incur sizable costs to receive infrequent payments as a commitment device, (ii) poor contract enforcement, however, limits competition among buyers in the supply of infrequent payments. We then present a model of demand and supply of infrequent payments and test its additional predictions.

Suggested Citation

  • Casaburi, Lorenzo & Macchiavello, Rocco, 2019. "Demand and supply of infrequent payments as a commitment device: evidence from Kenya," LSE Research Online Documents on Economics 100180, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:100180
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    References listed on IDEAS

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    Cited by:

    1. François Gerard & Joana Naritomi, 2019. "Job Displacement Insurance and (the Lack of) Consumption-Smoothing," NBER Working Papers 25749, National Bureau of Economic Research, Inc.
    2. François Gerard & Joana Naritomi, 2019. "Job Displacement Insurance and (the Lack of) Consumption-Smoothing," NBER Working Papers 25749, National Bureau of Economic Research, Inc.
    3. Frank Schilbach, 2019. "Alcohol and Self-Control: A Field Experiment in India," American Economic Review, American Economic Association, vol. 109(4), pages 1290-1322, April.
    4. Fo Kodjo Dzinyefa Aflagah & Tanguy Bernard & Angelino Viceisza, 2019. "Cheap Talk and Coordination in the Lab and in the Field: Collective Commercialization in Senegal," NBER Working Papers 26045, National Bureau of Economic Research, Inc.
    5. Macchiavello, Rocco & Morjaria, Ameet, 2019. "Competition and Relational Contracts in the Rwanda Coffee Chain," CEPR Discussion Papers 13607, C.E.P.R. Discussion Papers.
    6. Macchiavello, Rocco & Miquel-Florensa, Josepa, 2019. "Buyer-Driven Upgrading in GVCs: The Sustainable Quality Program in Colombia," CEPR Discussion Papers 13935, C.E.P.R. Discussion Papers.

    More about this item

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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