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Buying Fields and Marrying Daughters: An Empirical Analysis of Rosca Auctions in a South Indian Village

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  • Stefan Klonner

    (Yale University)

Abstract

A bidding rotating savings and credit association (Rosca) is modeled as a sequence of symmetric-independent-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, non-altruistic 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, 2004. "Buying Fields and Marrying Daughters: An Empirical Analysis of Rosca Auctions in a South Indian Village," Yale School of Management Working Papers ysm364, Yale School of Management.
    • Handle: RePEc:ysm:somwrk:ysm364
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    Cited by:

    1. Conning, Jonathan & Udry, Christopher, 2007. "Rural Financial Markets in Developing Countries," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 56, pages 2857-2908, Elsevier.
    2. Alexander Karaivanov, 2003. "Financial Contracts and Occupational Choice," Computing in Economics and Finance 2003 25, Society for Computational Economics.
    3. Rediet Abebe & Adam Eck & Christian Ikeokwu & Samuel Taggart, 2022. "An Algorithmic Introduction to Savings Circles," Papers 2203.12486, arXiv.org.

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    Keywords

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    JEL classification:

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

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