American Economic Review Vol. 105 No. 9 2015

The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports

Rocco Macchiavello¹; Ameet Morjaria²

¹ Economics Department, Warwick University, Coventry, CV4 7AL, UK (e-mail: ) · ² Department of Managerial Economics and Decision Sciences, Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208 (e-mail: )

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.

DOI

10.1257/aer.20120141

Volume

105

Issue

9

Pages

2911-2945

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓