Reciprocity and Exclusion in Informal Financial Institutions: An Experimental Study of Rotating Savings and Credit Associations

Shimpei Koike, Mayuko Nakamaru, Tokinao Otaka, Hajime Shimao, Ken-Ichi Shimomura and Takehiko Yamato
Additional contact information
Shimpei Koike: Department of Value and Decision Science, Tokyo Institute of Technology
Mayuko Nakamaru: Department of Value and Decision Science, Tokyo Institute of Technology
Tokinao Otaka: Department of Social Engineering, Tokyo Institute of Technology
Hajime Shimao: Department of Value and Decision Science, Tokyo Institute of Technology
Ken-Ichi Shimomura: Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan
Takehiko Yamato: Department of Social Engineering, Tokyo Institute of Technology

No DP2015-31, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: Rotating savings and credit associations (Roscas) are worldwide informal financial institutions, in which all participants contribute to a fund and one of them receives it in rotation. A crucial problem is that participants have incentives to default on contributing after receiving the fund. We conducted an experiment and found that Roscas were sustained using a rule of excluding defaulters from the group by voting. We observed that group members behave reciprocally and revengefully: a member contributed (or did not contribute) to the fund of other members who had (or had not) contributed to theirs. This voluntary behavior sustained Roscas.

Keywords: Rosca; Exclusion; Reputation; Reciprocity; Punishment (search for similar items in EconPapers)
JEL-codes: C92 D71 G21 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015-07
New Economics Papers: this item is included in nep-cdm, nep-exp, nep-iue and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2015-31.pdf First version, 2015 (application/pdf)

Related works:
Journal Article: Reciprocity and exclusion in informal financial institutions: An experimental study of rotating savings and credit associations (2018)
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