Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98356
Authors: 
Klonner, Stefan
Year of Publication: 
2003
Series/Report no.: 
Center Discussion Paper 854
Abstract: 
A bidding rotating savings and credit association (Rosca) is modeled as a sequence of symmetricindependent-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, nonaltruistic 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.
Subjects: 
Roscas
Auctions
JEL: 
D44
G20
Document Type: 
Working Paper

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