Demand and Supply of Infrequent Payments as a Commitment Device: Evidence from Kenya

Lorenzo Casaburi and Rocco Macchiavello

American Economic Review, 2019, vol. 109, issue 2, 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.

JEL-codes: K12 L66 O13 O17 Q12 Q13 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aer.20180281
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Citations: View citations in EconPapers (42)

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