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Does Market Experience Promote Rational Choice? Experimental Evidence from Rural Ethiopia

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  • Francesco Cecchi
  • Erwin Bulte

Abstract

We organize a field experiment with sesame farmers and brokers in northern Ethiopia to explore whether market experience fosters rational behavior--proxied by fewer Generalized Axiom of Revealed Preference (GARP) violations in a simple choice experiment. In the baseline study, farmers and brokers performed equally well or badly, which is consistent with qualitative evidence that the prior "trading experience" of our brokers is not obtained in a competitive setting. Following random assignment to a competitive market setting--a one-day trading session in a sesame auction--we find that treated farmers and brokers behave more rationally than their peers in the control group.

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  • Francesco Cecchi & Erwin Bulte, 2013. "Does Market Experience Promote Rational Choice? Experimental Evidence from Rural Ethiopia," Economic Development and Cultural Change, University of Chicago Press, vol. 61(2), pages 407-429.
    • Handle: RePEc:ucp:ecdecc:doi:10.1086/668275
    DOI: 10.1086/668275
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    Cited by:

    1. Meub, Lukas & Proeger, Till, 2016. "Are groups 'less behavioral'? The case of anchoring," University of Göttingen Working Papers in Economics 188 [rev.], University of Goettingen, Department of Economics.
    2. Melesse, Mequanint B. & Cecchi, Francesco, 2017. "Does Market Experience Attenuate Risk Aversion? Evidence from Landed Farm Households in Ethiopia," World Development, Elsevier, vol. 98(C), pages 447-466.
    3. Gugissa, Desalegn A. & Ingenbleek, Paul T.M. & van Trijp, Hans C.M., 2021. "Market knowledge as a driver of sustainable use of common-pool resources: A lab-in-the-field study among pastoralists in Ethiopia," Ecological Economics, Elsevier, vol. 185(C).
    4. Jacques van der Gaag & Vid Stimac, 2012. "How can we increase resources for health care in the developing world? Is (subsidized) voluntary health insurance the answer?," Health Economics, John Wiley & Sons, Ltd., vol. 21(1), pages 55-61, January.
    5. Lukas Meub & Till Proeger, 2018. "Are groups ‘less behavioral’? The case of anchoring," Theory and Decision, Springer, vol. 85(2), pages 117-150, August.
    6. Dietrich, Stephan & Beekman, Gonne & Nillesen, Eleonora, 2018. "Market integration and pro-social behaviour in rural Liberia," MERIT Working Papers 2018-010, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    7. Meub, Lukas & Proeger, Till, 2014. "Are groups 'less behavioral'? The case of anchoring," University of Göttingen Working Papers in Economics 188, University of Goettingen, Department of Economics.
    8. Meijerink, Gerdien & Bulte, Erwin & Alemu, Dawit, 2014. "Formal institutions and social capital in value chains: The case of the Ethiopian Commodity Exchange," Food Policy, Elsevier, vol. 49(P1), pages 1-12.

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