Title
Reciprocity and Exclusion in Informal Financial Institutions: An Experimental Study of Rotating Savings and Credit Associations
Abstract
Rotating savings and credit associations (Roscas) are worldwide informal financial institutions, in which all participants contribute to a fund and one of them receives it in rotation. A crucial problem is that participants have incentives to default on contributing after receiving the fund. We conducted an experiment and found that Roscas were sustained using a rule of excluding defaulters from the group by voting. We observed that group members behave reciprocally and revengefully: a member contributed (or did not contribute) to the fund of other members who had (or had not) contributed to theirs. This voluntary behavior sustained Roscas.
Keywords
Rosca, Exclusion, Reputation, Reciprocity, Punishment
JEL Classification
C92, D71, G21
Inquiries
Department of Value and Decision Science,
Tokyo Institute of Technology
Mayuko NAKAMARU
Department of Value and Decision Science,
Tokyo Institute of Technology
Tokinao OTAKA
Department of Social Engineering, Tokyo Institute of Technology
Hajime SHIMAO
Department of Value and Decision Science,
Tokyo Institute of Technology
Ken-Ichi SHIMOMURA
Research Institute for Economics and Business Administration,
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059
Takehiko YAMATO
Department of Social Engineering, Tokyo Institute of Technology