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Distance to market and search costs in an African maize market

Author

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  • Mahdi, Shireen

Abstract

Farm-gate buying by small itinerant buyers is the dominant mode of primary marketing in Tanzania's maize market. This paper estimates the effect of household distance to market on maize farm-gate prices, and the extent to which seasonally determined search costs can explain price variations between the lean and the harvest seasons using data from the most recent Tanzania Household Budget Survey (2007). The author observes that greater distance to market depresses farm-gate prices but that it is a relatively modest effect, and that this effect is pro-cyclical in that it is stronger during the harvest season when prices are lowest. The paper discusses the latter result with reference to search costs as an explanatory factor. It also briefly places the findings in the context of Tanzania's food security patterns, making a link between food insecurity and high search costs. The main policy conclusion is that coordinating mechanisms such as village market places (in parallel with farm-gate buying) may reduce transaction costs in rural markets.

Suggested Citation

  • Mahdi, Shireen, 2012. "Distance to market and search costs in an African maize market," Policy Research Working Paper Series 6172, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6172
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    References listed on IDEAS

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    1. Vakis, Renos & Sadoulet, Elisabeth & de Janvry, Alain, 2003. "Measuring Transactions Costs from Observed Behavior: Market Choice in Peru," CUDARE Working Papers 25110, University of California, Berkeley, Department of Agricultural and Resource Economics.
    2. Simon P. Anderson & Regis Renault, 1999. "Pricing, Product Diversity, and Search Costs: A Bertrand-Chamberlin-Diamond Model," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 719-735, Winter.
    3. Renkow, Mitch & Hallstrom, Daniel G. & Karanja, Daniel D., 2004. "Rural infrastructure, transactions costs and market participation in Kenya," Journal of Development Economics, Elsevier, vol. 73(1), pages 349-367, February.
    4. Marcel Fafchamps & Ruth Vargas Hill, 2005. "Selling at the Farmgate or Traveling to Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 717-734.
    5. J. Yannis Bakos, 1997. "Reducing Buyer Search Costs: Implications for Electronic Marketplaces," Management Science, INFORMS, vol. 43(12), pages 1676-1692, December.
    6. Alene, Arega D. & Manyong, V.M. & Omanya, G. & Mignouna, H.D. & Bokanga, M. & Odhiambo, G., 2008. "Smallholder market participation under transactions costs: Maize supply and fertilizer demand in Kenya," Food Policy, Elsevier, vol. 33(4), pages 318-328, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Markets and Market Access; Transport Economics Policy&Planning; E-Business; Food&Beverage Industry; Access to Markets;
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