Opportunistic Behaviour and Trust: Experimental Results from Broccoli Farmers in Ecuador

Abstract

Linking smallholder farmers to high-value markets through contract farming has become an important strategy to increase farm incomes in developing countries. However, various forms of opportunistic behaviour have been reported, threatening the sustainability of inclusive supply chains. When formal institutions are weak, informal codes of conduct like trust can be important complements to facilitate market transactions. We explore the effect of opportunistic behaviour on farmers’ trust, using a field-framed trust experiment with prior signaling with small-scale farmers in Ecuador. These farmers are linked to different types of markets, including high-value export chains, and have been exposed to varying levels of opportunistic behaviour in the past. Our unique dataset allows us to control for self-selection of game participants. We find that a positive signal triggers a positive response increasing trust, while a negative signal has no effect – possibly reflecting very low overall trust levels. In settings where market linkages have failed previously, ex-ante credible positive signals could help to build trust and encourage small farmers’ participation in sustainable value chains.