Demand and Supply of Infrequent Payments as a Commitment Device: Evidence from Kenya
- (pp. 523-55)
Abstract
Despite extensive evidence that preferences are often time-inconsistent, there is only scarce evidence of willingness to pay for commitment. Infrequent payments for frequently provided goods and services are a common feature of many markets and they may naturally provide commitment to save for lumpy expenses. Multiple experiments in the Kenyan dairy sector show that: (i) farmers are willing to incur sizable costs to receive infrequent payments as a commitment device, (ii) poor contract enforcement, however, limits competition among buyers in the supply of infrequent payments. We then present a model of demand and supply of infrequent payments and test its additional predictions.Citation
Casaburi, Lorenzo, and Rocco Macchiavello. 2019. "Demand and Supply of Infrequent Payments as a Commitment Device: Evidence from Kenya." American Economic Review, 109 (2): 523-55. DOI: 10.1257/aer.20180281Additional Materials
JEL Classification
- K12 Contract Law
- L66 Food; Beverages; Cosmetics; Tobacco; Wine and Spirits
- O13 Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
- O17 Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- Q12 Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- Q13 Agricultural Markets and Marketing; Cooperatives; Agribusiness