Market Anomalies Under Saving Constraints: Evidence from the Kenya Dairy Industry
When suppliers face saving constraints, buyers can compete by oering deferred payments. However, with limited enforcement, the ability to credibly promise deferred payments may vary across buyers. A simple model of a market with these features is developed and tested using multiple experimental designs and data sources from Kenyan dairy farming. The evidence unveils interlinkages between saving and product markets. A segmented market emerges in which buyers serve distinct purposes: small traders provide liquidity and pay a higher price; whereas a large buyer provides deferred payments that alleviate saving constraints. In this interlinked market structure, standard price incentives are ineective in increasing deliveries.