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Open Access Publications from the University of California

Search Cost, Intermediation, and Trade: Experimental Evidence from Ugandan Agricultural Markets

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High search costs weaken market integration in developing country agricultural markets, harming both farmers and consumers. We present evidence from a large-scale experiment designed to reduce search costs in randomly selected subcounties in Uganda by introducing a mobile phone-based marketplace for agricultural commodities. The intervention drives increases in trade ows and reductions in price divergence across treated markets. Entry by traders into treated markets increases, and profits of incumbents decrease. However, small-scale farmers find it diffcult to reach the scale necessary to find buyers on the platform; only the largest farmers use the platform. As a result, we are only able to detect significant increases in revenues among the farmers most likely to use the platform. Point estimates suggest effects that are meaningful in magnitude, but not statistically significant for the majority of farmers. Since farmers are so numerous and the cost per-farmer is low, these income gains per household aggregate to make the intervention strongly cost-beneficial from an overall welfare perspective.

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