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Reputation, honesty, and cheating in informal milk markets in India

Author

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  • Kröll, Markus
  • Rustagi, Devesh

Abstract

Sellers display astounding differences in their cheating behavior, even in developing countries with weak enforcement of rules. Using the context of informal milk markets in India, we examine the role of reputation and norms of honesty as potential explanations. Our results show that individuals cannot verify milk quality, which weakens the scope of reputation-based mechanisms. But a strong correlation exists between milk quality and norms of honesty, measured using a novel behavioral experiment. Price collusion allows for the coexistence of honest and dishonest milkmen within a market. Norms of honesty can mitigate market inefficiency under the right institutional environment.

Suggested Citation

  • Kröll, Markus & Rustagi, Devesh, 2017. "Reputation, honesty, and cheating in informal milk markets in India," SAFE Working Paper Series 134, Leibniz Institute for Financial Research SAFE, revised 2017.
    • Handle: RePEc:zbw:safewp:134
    DOI: 10.2139/ssrn.2982365
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    Cited by:

    1. Falk, Armin & Abeler, Johannes & Kosse, Fabian, 2021. "Malleability of preferences for honesty," CEPR Discussion Papers 16164, C.E.P.R. Discussion Papers.
    2. Alain Cohn & Tobias Gesche & Michel André Maréchal, 2022. "Honesty in the Digital Age," Management Science, INFORMS, vol. 68(2), pages 827-845, February.
    3. Ellen Garbarino & Robert Slonim & Marie Claire Villeval, 2018. "A method to estimate mean lying rates and their full distribution," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 4(2), pages 136-150, December.
    4. Shuguang Jiang & Marie Claire Villeval, 2022. "Dishonesty in Developing Countries -What Can We Learn From Experiments?," Working Papers hal-03899654, HAL.
    5. Timothy N. Cason & Steven Y. Wu, 2019. "Subject Pools and Deception in Agricultural and Resource Economics Experiments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(3), pages 743-758, July.
    6. Alem, Yonas & Eggert, Håkan & Kocher, Martin G. & Ruhinduka, Remidius D., 2018. "Why (field) experiments on unethical behavior are important: Comparing stated and revealed behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 156(C), pages 71-85.
    7. Michelson, Hope & Fairbairn, Anna & Ellison, Brenna & Maertens, Annemie & Manyong, Victor, 2021. "Misperceived quality: Fertilizer in Tanzania," Journal of Development Economics, Elsevier, vol. 148(C).
    8. Hoffmann, Lisa, 2023. "(Ch)eating for oneself or cheating for others? Experimental evidence from young politicians and students in Kenya," OSF Preprints xnez5, Center for Open Science.
    9. Ayal, Shahar & Celse, Jérémy & Hochman, Guy, 2021. "Crafting messages to fight dishonesty: A field investigation of the effects of social norms and watching eye cues on fare evasion," Organizational Behavior and Human Decision Processes, Elsevier, vol. 166(C), pages 9-19.
    10. Abeler, Johannes & Falk, Armin & Kosse, Fabian, 2021. "Malleability of Preferences for Honesty," Rationality and Competition Discussion Paper Series 296, CRC TRR 190 Rationality and Competition.
    11. Garbarino, Ellen & Slonim, Robert & Villeval, Marie Claire, 2019. "Loss aversion and lying behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 379-393.

    More about this item

    Keywords

    Cheating; informal sector; reputation; norms of honesty; milk markets; India;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D00 - Microeconomics - - General - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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