Kinship, Trust and Moral Hazard in the Motorcycle-Taxi Market in Togo and Benin

blimpo, moussa p.;

In the motorcycle-taxi market in most Sub-Saharan African countries, the relation
between vehicle owner and driver is characterised by a principal-agent problem with
the following features: the owner cannot observe the final output of the driver and therefore cannot condition awageonit, andhighereffort fromthedriverdepreciatesthemotorcycle. Thesetwofeatures imply that it is in theowner�sbest interest that thedriverexerts as little effort as possiblewhile still leasing the motorcycle fromhim. The problem with loweffort
implementation is that themotorcyclewill not generate enough revenue. I analyse
the contractual arrangements between owners andthe drivers in this market using survey data fromfour cities in Togo and Benin. Evidence suggests that the quest for trust through kinship between owner and driver may explain the prevalence of a contract that induces drivers to exert excessive effort, leading to adverse outcomes like traffic accidents