Importance of Ethnic Networks in Business Transactions in India

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secondary evaluation summary · J-PAL

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Contract Customization Risk and Advance Payment Metrics

"The customization of pens (printing a logo on them) increases the risk for the seller because if a printed pen order is rejected or canceled at a later stage by the customer, the seller would suffer a larger loss since the secondhand market for these pens is very low."

Cross-Community Audit Methodology for Bias Detection

"These auditors were randomly matched to the wholesalers in such a manner that each shop would be visited at least once by auditors from each of the three communities."

Ethnic Buyer Bargaining Strategy Disparities

"The Andhra buyers paid more for a similar product purchase, while the Marwari buyers paid the least. There was not much difference between the advance payments paid by Marwari and Andhra buyers, but both were asked for a higher upfront payment than Tamilians."

Institutional Substitution via Ethnic Stereotyping

"In the presence of weak legal structures, people may use ethnic stereotypes to try to minimize their risk during business transactions."

Preference-Based In-Group Price Discounting

"Buyers received a discounted price when they were randomly matched with a wholesaler from their own ethnic group. However, on average the wholesalers do not seem to ask for smaller upfront payments on a customized product if the buyer is from the same ethnic group."