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

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  • Casaburi, Lorenzo
  • Macchiavello, Rocco

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.

Suggested Citation

  • Casaburi, Lorenzo & Macchiavello, Rocco, 2015. "Loyalty, exit, and enforcement: evidence from a Kenya Dairy Cooperative," LSE Research Online Documents on Economics 68218, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:68218
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    1. Rachel Kranton & Anand V. Swamy, 2008. "Contracts, Hold-Up, and Exports: Textiles and Opium in Colonial India," American Economic Review, American Economic Association, vol. 98(3), pages 967-989, June.
    2. Robert Gibbons & Rebecca Henderson, 2012. "What Do Managers Do? [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    3. Marcel Fafchamps, 2004. "Market Institutions in Sub-Saharan Africa: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062364, April.
    4. Robert Gibbons & John Roberts, 2012. "The Handbook of Organizational Economics," Economics Books, Princeton University Press, edition 1, volume 1, number 9889.
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    Cited by:

    1. Lorenzo Casaburi & Rocco Macchiavello, 2019. "Demand and Supply of Infrequent Payments as a Commitment Device: Evidence from Kenya," American Economic Review, American Economic Association, vol. 109(2), pages 523-555, February.
    2. Rao, Manaswini & Shenoy, Ashish, 2023. "Got (clean) milk? Organization, incentives, and management in Indian dairy cooperatives," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 708-722.
    3. Mark Treurniet, 2021. "The Potency of Quality Incentives: Evidence from the Indonesian Dairy Value Chain," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1661-1678, October.
    4. Riekhof, Marie-Catherine, 2019. "The insurance premium in the interest rates of interlinked loans in a small-scale fishery," Environment and Development Economics, Cambridge University Press, vol. 24(1), pages 87-112, February.
    5. Geng, Xin & Janssens, Wendy & Kramer, Berber, 2018. "Liquid milk: Cash Constraints and Recurring Savings among Dairy Farmers in Kenya," 2018 Annual Meeting, August 5-7, Washington, D.C. 273823, Agricultural and Applied Economics Association.
    6. Aflagah, Kodjo & Bernard, Tanguy & Viceisza, Angelino, 2022. "Cheap talk and coordination in the lab and in the field: Collective commercialization in Senegal," Journal of Development Economics, Elsevier, vol. 154(C).
    7. Betelhem M. Negede & Hugo De Groote & Bart Minten & Maarten Voors, 2024. "Does access to improved grain storage technology increase farmers' welfare? Experimental evidence from maize farming in Ethiopia," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(1), pages 137-152, February.
    8. Gianmarco Daniele & Sulagna Mookerjee & Denni Tommasi, 2021. "Informational Shocks and Street-Food Safety: A Field Study in Urban India," The Review of Economics and Statistics, MIT Press, vol. 103(3), pages 563-579, July.
    9. Geng, Xin & Janssens, Wendy & Kramer, Berber, 2023. "Liquid milk: Savings, insurance and side-selling in cooperatives," Journal of Development Economics, Elsevier, vol. 165(C).
    10. Miller, Scott, 2020. "Investigating the Inclusive-Performance Tradeoff in Agricultural Cooperatives: Evidence from Nepal," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304544, Agricultural and Applied Economics Association.
    11. Akerlof, Robert & Ashraf, Anik & Macchiavello, Rocco & Rabbani, Atonu, 2020. "Layoffs and productivity at a Bangladeshi sweater factor," The Warwick Economics Research Paper Series (TWERPS) 1293, University of Warwick, Department of Economics.
    12. Spray, J., 2101. "Search Externalities in Firm-to-Firm Trade," Cambridge Working Papers in Economics 2108, Faculty of Economics, University of Cambridge.
    13. Miller, Scott & Mullally, Conner, 2022. "Investigating the Inclusive-Performance Tradeoff in Agricultural Cooperatives: Evidence from Nepal," World Development, Elsevier, vol. 159(C).
    14. Anik Ashraf, 2022. "Performance Ranks, Conformity, and Cooperation: Evidence from a Sweater Factory," CESifo Working Paper Series 9591, CESifo.
    15. Macchiavello, Rocco & Casaburi, Lorenzo, 2015. "Firm and Market Response to Saving Constraints: Evidence from the Kenyan Dairy Industry," CEPR Discussion Papers 10952, C.E.P.R. Discussion Papers.
    16. Laura Boudreau & Julia Cajal-Grossi & Rocco Macchiavello, 2023. "Global Value Chains in Developing Countries: A Relational Perspective from Coffee and Garments," Journal of Economic Perspectives, American Economic Association, vol. 37(3), pages 59-86, Summer.
    17. Bernard, Tanguy & Hidrobo, Melissa & Le Port, Agnès & Rawat, Rahul, 2017. "Nutrition incentives in dairy contract farming in northern Senegal," IFPRI discussion papers 1629, International Food Policy Research Institute (IFPRI).
    18. Ibrahima Barry & Damien Rousselière, 2022. "Do quality incentive payments improve cooperative performance? The case of small French agricultural cooperatives," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(3), pages 938-948, September.

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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P13 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Cooperative Enterprises
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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