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

This paper provides evidence on the importance of reputation, intended as beliefs buyers hold about sellerís reliability, in the context of the Kenyan rose export sector. A model of reputation and relational contracting is developed and tested. We show that 1) the value of the relationship increases with the age of the relationship; 2) during an exogenous negative supply shock sellers prioritize relationships consistently with the predictions of the model; and 3) reliability at the time of the shock positively correlates with future survival and relationship value. Models exclusively focussing on enforcement or insurance considerations cannot account for the evidence.


Issue Date:
2013-06
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/270427
Language:
English
Total Pages:
49
JEL Codes:
C73; D23; L14; O12
Series Statement:
WERP 1032




 Record created 2018-04-02, last modified 2020-10-28

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