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Price Transmission and Trader Entry in Domestic Commodity Markets

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  • Marcel Fafchamps
  • Ruth Hill

Abstract

Using detailed data from three simultaneous surveys of producers, traders, and exporters, this paper examines the transmission of international coffee prices through the domestic value chain in Uganda. We find that producer prices fluctuations are inconsistent with constant transactions costs. We investigate two possible explanations for this finding: marketing costs that increase with price, and trader entry. We test and reject the marketing costs explanation but we find some evidence of trader entry in response to a rise in export price. Our findings suggest that small itinerant traders initiate coffee trading in response to an export price increase, probably taking advantage of farmers` ignorance of price movements.

Suggested Citation

  • Marcel Fafchamps & Ruth Hill, 2005. "Price Transmission and Trader Entry in Domestic Commodity Markets," Economics Series Working Papers GPRG-WPS-038, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:gprg-wps-038
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    References listed on IDEAS

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