Buying Fields and Marrying Daughters: An Empirical Analysis of Rosca Auctions in a South Indian Village

Stefan Klonner

Yale School of Management Working Papers from Yale School of Management

Abstract: A bidding rotating savings and credit association (Rosca) is modeled as a sequence of symmetric-independent-private-value auctions with price-proportional benefits to bidders. We estimate a structural econometric model which, by introducing an altruistic component into each bidder's utility function, allows for socially favorable deviations from the private information, non-altruistic bidding equilibrium. We find that bidding is more altruistic in groups managed by experienced organizers and in Roscas whose current members have already run through more than one Rosca cycle of the current group, implying that effective leadership and enduring relationships help mitigate the social cost of strategic behavior. When a bidder has to meet an unforeseen expenditure and this information is public, bidders act more altruistically than when information is private and the Rosca funds are used for investment, indicating reciprocal risk sharing among Rosca participants.

Keywords: Roscas; Auctions (search for similar items in EconPapers)
JEL-codes: D44 G20 (search for similar items in EconPapers)
Date: 2004-07-28
New Economics Papers: this item is included in nep-cwa
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Citations: View citations in EconPapers (2)

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Working Paper: Buying Fields and Marrying Daughters: An Empirical Analysis of Rosca Auctions in a South Indian Village (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ysm:somwrk:ysm364

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