Improving Trust and Reciprocity in Agricultural Input Markets : A Lab-in-The-Field Experiment in Bangladesh

Agricultural inputs are experience goods: before purchasing them, buyers only observe their price, providing sellers an opportunity to cheat on quality. In a field experiment in rural Bangladesh, we replicate a market for experience goods, with agricultural input retailers (sellers) choosing price and quality, and farmers (buyers) choosing from which seller to purchase inputs. The experiment is designed as a modified trust game, so buyers will only purchase more expensive goods if they trust their sellers to reciprocate and provide high quality. We analyze buyer and seller behavior in these markets, including the effects of buyer-driven accreditation and loyalty rewards for sellers of high-quality products. Absent market interventions, sellers mostly provide low-quality products, and buyers reveal low demand for more expensive, high-quality inputs. Accrediting sellers based on buyer reviews leads to higher input quality (seller reciprocity) and more repeat purchases (buyer trust) only when combined with loyalty rewards