Reputation, honesty, and cheating in informal milk markets in India

Markus Kröll and Devesh Rustagi

No 134, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: Sellers display astounding differences in their cheating behavior, even in developing countries with weak enforcement of rules. Using the context of informal milk markets in India, we examine the role of reputation and norms of honesty as potential explanations. Our results show that individuals cannot verify milk quality, which weakens the scope of reputation-based mechanisms. But a strong correlation exists between milk quality and norms of honesty, measured using a novel behavioral experiment. Price collusion allows for the coexistence of honest and dishonest milkmen within a market. Norms of honesty can mitigate market inefficiency under the right institutional environment.

Keywords: Cheating; informal sector; reputation; norms of honesty; milk markets; India (search for similar items in EconPapers)
JEL-codes: C93 D00 O13 Q01 (search for similar items in EconPapers)
Date: 2017, Revised 2017
New Economics Papers: this item is included in nep-agr and nep-soc
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:134

DOI: 10.2139/ssrn.2982365

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