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

51 Pages Posted: 2 Jul 2013

Date Written: June 2013

Abstract

This paper provides evidence on the importance of reputation, intended as beliefs buyers hold about seller's 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 focusing on enforcement or insurance considerations cannot account for the evidence.

Keywords: exports, relational contracts, reputation

JEL Classification: C73, D23, L14, O12

Suggested Citation

Macchiavello, Rocco and Morjaria, Ameet, The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports (June 2013). CEPR Discussion Paper No. DP9531. Available at SSRN: https://ssrn.com/abstract=2288496

Rocco Macchiavello (Contact Author)

University of Oxford - Nuffield College of Medicine ( email )

New Road
Oxford, OX1 1NF
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ameet Morjaria

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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