Loyalty, exit, and enforcement: evidence from a Kenya Dairy Cooperative

Lorenzo Casaburi and Rocco Macchiavello

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

JEL-codes: D83 O13 P13 Q13 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-agr and nep-soc
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Citations: View citations in EconPapers (16)

Published in American Economic Review, 2015, 105(5), pp. 286-290. ISSN: 0002-8282

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Journal Article: Loyalty, Exit, and Enforcement: Evidence from a Kenya Dairy Cooperative (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:68218

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