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

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.


Keywords:
Issue Date:
2003
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/28449
PURL Identifier:
http://purl.umn.edu/28449
Total Pages:
46
JEL Codes:
D44; G20
Series Statement:
Center Discussion Paper No. 854




 Record created 2017-04-01, last modified 2019-08-26

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