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Research Details
The Value of Relationships: Evidence from a Supply Shock to Kenyan Flower Exporters, American Economic Review
Abstract
This paper provides evidence on the importance of reputation in the context of the Kenyan rose export sector. A model of reputation and relational contracting is developed and tested. A seller's reputation is defined by buyer's beliefs about seller's reliability. We show that (i) due to lack of enforcement, the volume of trade is constrained by the value of the relationship; (ii) the value of the relationship increases with the age of the relationship; and (iii) during an exogenous negative supply shock deliveries are an inverted-U shaped function of relationship's age. Models exclusively focusing on enforcement or insurance considerations cannot account for the evidence.
Type
Article
Author(s)
Date Published
2015
Citations
. 2015. The Value of Relationships: Evidence from a Supply Shock to Kenyan Flower Exporters. American Economic Review.(9): 2911-45.