Business Dynamics and Informal Contracts: Experimental Evidence from the Cowpea Street Food Sector in West Africa
Miriam Otoo Department of Agricultural Economics, Purdue University, 403 W. State Street, West Lafayette, IN 47907, USA. Email:
[email protected]
Joan Fulton Department of Agricultural Economics, Purdue University, 403 W. State Street, West Lafayette, IN 47907, USA. Email:
[email protected]
Steven Wu Department of Agricultural Economics, Purdue University, 403 W. State Street, West Lafayette, IN 47907, USA. Email:
[email protected]
Germaine Ibro Institut National de Recherche Agronomique du Niger (INRAN), Niamey, Niger. Email:
[email protected]
Poster prepared for presentation at the Agricultural & Applied Economics Association 2010 AAEA, CAES & WAEA Joint Annual Meeting, Denver, Colorado, July 25-27, 2010
Copyright 2010 by Miriam Otoo, Joan Fulton, Steven Wu and Germaine Ibro. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.
The gift contract is the most “complete” of the incomplete contracts as it leaves the seller – grinder with discretionary latitude on quality but fully enforces the vendor’s obligations. Fixed price + tip (most complete/ payment before service). This contract is similar to the gift contract but does not include an upfront bonus component. Fixed price (conditionally complete/ payment before service).
All terms of this contract are discretionary and provide discretionary latitude to both parties to deviate from the contract and thus represents the most “incomplete” of the incomplete contracts.
Business Dynamics and Informal Contracts: Experimental Evidence from the Cowpea Street Food Sector in West Africa Miriam Otoo, Graduate Research Assistant, Purdue University; Joan Fulton, Professor, Purdue University; Steven Wu, Associate Professor, Purdue University; Germaine Ibro, Economist, Instituit National de Recherche Agricole du Niger
BACKGROUND
Hypotheses and Expected Results
Potential Hold up Problem
Grinding of the cowpeas is a Critical Stage in Kossaï Production
RESULTS a) Ex-Ante Efficient Contractual Structures
b) Ex-Post Efficient Contractual Structures 3.0
Table 2: Contract Offers and Acceptances Rates Number of Contracts Offered (% of total) Gift contract (GC) Standard Price contract (SP)
54 (17%)
52 (18%)
102 (35%)
164(51%)
134 (47%)
Discretionary Bonus contract (DBC)
Table 4: Quality and Quality Deviation Summary Statistics across Contractual Structures
320
No. of trades Gift Contract
% of trades Avg. Avg. Avg. size of No. of where q
qGC P-Value Chi-Square
10% 0% Discretionary Bonus Contract
H0: qDBC = qSP
