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Repeated Transaction in Rural Grain Markets of Ethiopia

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  • Getaw Tadesse
  • Gerald Shively

Abstract

This article uses the theory of repeated transaction to model exchange in rural grain markets. We examine the theoretical and empirical drivers of repeated transaction, as well as potential problems that may arise as a result of its widespread use. We develop a structural repeated game to represent buyer-seller relations in a developing country grain market, motivated by observations in Ethiopia. The model generates hypotheses regarding the logic that drives long-term tied transactions, as governed by information access, screening and investment costs, and time preferences. The model's predictions are tested using market transaction data collected in Ethiopia in 2009. Results support the view that a relational contract is driven by access to information and the costs of screening. Our major finding is that trust in relational trading can emerge through costly repeated interaction.

Suggested Citation

  • Getaw Tadesse & Gerald Shively, 2013. "Repeated Transaction in Rural Grain Markets of Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 49(9), pages 1172-1187, September.
    • Handle: RePEc:taf:jdevst:v:49:y:2013:i:9:p:1172-1187
    DOI: 10.1080/00220388.2012.740015
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    1. Marcel Fafchamps, 2004. "Market Institutions in Sub-Saharan Africa: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062364, December.
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    1. Donkor, Emmanuel & Mbeche, Robert & Mithofer, Dagmar, 2021. "Relational contract decision of retailers in the grasshopper value chain in Uganda," 61st Annual Conference, Berlin, Germany, September 22-24, 2021 317078, German Association of Agricultural Economists (GEWISOLA).
    2. Gelo, Dambala, 2020. "Forest commons, vertical integration and smallholder’s saving and investment responses: Evidence from a quasi-experiment," World Development, Elsevier, vol. 132(C).
    3. Gelaw, Fekadu & Speelman, Stijn & Van Huylenbroeck, Guido, 2016. "Farmers’ marketing preferences in local coffee markets: Evidence from a choice experiment in Ethiopia," Food Policy, Elsevier, vol. 61(C), pages 92-102.
    4. Gelo, Dambala & Muchapondwa, Edwin & Shimeles, Abebe & Dikgang, Johane, 2020. "Aid, collective action and benefits to smallholders: Evaluating the World Food Program's purchase for progress pilot," Food Policy, Elsevier, vol. 97(C).
    5. Minten, Bart & Assefa, Thomas & Hirvonen, Kalle, 2017. "Can Agricultural Traders be Trusted? Evidence from Coffee in Ethiopia," World Development, Elsevier, vol. 90(C), pages 77-88.
    6. Tadesse, Getaw & Bahiigwa, Godfrey, 2015. "Mobile Phones and Farmers’ Marketing Decisions in Ethiopia," World Development, Elsevier, vol. 68(C), pages 296-307.
    7. Donkor, Emmanuel & Mbeche, Robert & Mithöfer, Dagmar, 2021. "Purchasing Behaviour and Relational Contract Decisions of Retailers in Grasshopper Value Chains in Uganda," 2021 Conference, August 17-31, 2021, Virtual 315105, International Association of Agricultural Economists.
    8. Donkor, Emmanuel & Mbeche, Robert & Mithöfer, Dagmar, 2023. "Strategic business decisions of retailers in the edible insect value chain in Uganda," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 26(2), January.
    9. Gelo, Dambala & Dikgang, Johane, 2019. "Collective action and heterogeneous welfare effects: Evidence from Ethiopian villages," World Development Perspectives, Elsevier, vol. 16(C).
    10. Kadjo, Didier & Ricker-Gilbert, Jacob & Tahirou, Abdoulaye & Shively, Gerald & Baco, Nasser, 2016. "Adverse selection in informal maize markets in Benin," 2016 Fifth International Conference, September 23-26, 2016, Addis Ababa, Ethiopia 249289, African Association of Agricultural Economists (AAAE).
    11. Gelo Dambala & Muchapondwa Edwin & Shimeles Abebe, 2017. "Working Paper 288 - Return to Investment in Agricultural Cooperatives in Ethiopia," Working Paper Series 2406, African Development Bank.
    12. Nguyen Hung Anh & Wolfgang Bokelmann, 2019. "Determinants of Smallholders’ Market Preferences: The Case of Sustainable Certified Coffee Farmers in Vietnam," Sustainability, MDPI, vol. 11(10), pages 1-20, May.
    13. Gelo, Dambala & Muchapondwa, Edwin & Shimeles, Abebe & Dikgang, Johane, 2019. "Welfare Effect and Elite Capture in Agricultural Cooperatives Intervention: Evidence from Ethiopian Villages," IZA Discussion Papers 12495, Institute of Labor Economics (IZA).

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