Can Agricultural Traders be Trusted? Evidence from Coffee in Ethiopia

Traditional food marketing systems in developing countries are often not trusted. In consequence, policy makers frequently try to regulate them and modern marketing arrangements are increasingly emerging to address some of their presumed deficiencies. However, it is unclear how trustworthy these markets actually are. The purpose of this study is to look at these issues in the case of coffee marketing in Ethiopia. Coffee markets in Ethiopia present an interesting case study due to the high price and quality differentiation linked to a number of both easily and not so easily observable characteristics. Moreover, modern marketing practices, such as modern retail, branding and packaging, are becoming increasingly common in Ethiopia’s urban coffee markets. When we define and examine trustworthiness in the Addis Ababa coffee market as a function of weights and quality, we find that traditional traders are relatively trustworthy on observable quality characteristics and weights. However, there is a consistent pattern of over-representation of not so easily verifiable quality characteristics. We further find that modern marketing outlets or formats, including modern domestic retail and branded packaged products, deliver higher quality at a higher price, but are not more trustworthy than traditional marketing arrangements in terms of these dimensions of trade transactions.