Loyalty, Exit, and Enforcement: Evidence from a Kenya Dairy Cooperative
American Economic Review
vol. 105,
no. 5, May 2015
(pp. 286-90)
Abstract
Organizations depend on members' "loyalty" for their success. Studying a cooperative's attempt to increase deliveries by members, we show that the threat of sanctions leads to highly heterogeneous response among members. Despite the cooperative not actually enforcing the threatened sanctions, positive effects for some members persist for several months. Other members "exit," stopping delivering altogether. Among non-compliant members we document substantial heterogeneity in beliefs about the legitimacy of the sanctions. This lack of common understanding highlights the role played by managers in organizations and provides a candidate explanation for lack of sanctions enforcement documented by Ostrom (1990) and other studies.Citation
Casaburi, Lorenzo, and Rocco Macchiavello. 2015. "Loyalty, Exit, and Enforcement: Evidence from a Kenya Dairy Cooperative." American Economic Review, 105 (5): 286-90. DOI: 10.1257/aer.p20151076Additional Materials
JEL Classification
- D83 Search; Learning; Information and Knowledge; Communication; Belief
- O13 Agriculture; Natural Resources; Energy; Environment; Other Primary Products
- P13 Cooperative Enterprises
- Q13 Agricultural Markets and Marketing; Cooperatives; Agribusiness