Transaction costs and market institutions
This paper examines the effect of transaction costs of search on the institution of grain brokers in Ethiopia. Primary data are used to derive traders' shadow opportunity costs of labor and of capital from IV estimation of net profits. A two-step Tobit model is used in which traders first choose where to trade and then choose whether to use a broker to search on their behalf. The results confirm traders' individual rationality in choosing brokerage, showing high transaction costs are linked to increased broker use while high social capital reduces broker use.
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- Alchian, Armen A & Demsetz, Harold, 1972.
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- Aitken, Michael J & Garvey, Gerald T & Swan, Peter L, 1995. "How Brokers Facilitate Trade for Long-Term Clients in Competitive Securities Markets," The Journal of Business, University of Chicago Press, vol. 68(1), pages 1-33, January.
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- Mundlak, Yair, 1996. "Production Function Estimation: Reviving the Primal," Econometrica, Econometric Society, vol. 64(2), pages 431-438, March.
- Harold Demsetz, 1968. "The Cost of Transacting," The Quarterly Journal of Economics, Oxford University Press, vol. 82(1), pages 33-53. Full references (including those not matched with items on IDEAS)
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