Reference : Intermediaries, transport costs and interlinked transactions
E-prints/Working papers : Already available on another site
Business & economic sciences : Special economic topics (health, labor, transportation…)
Intermediaries, transport costs and interlinked transactions
Lefevre, Mélanie mailto [Université de Liège - ULiège > HEC-Ecole de gestion : UER > Economie générale et gestion publique >]
Tharakan, Joseph mailto [Université de Liège - ULiège > HEC-Ecole de gestion : UER > Economie internationale >]
[en] Rural development ; Spatial pricing ; Transportation
[en] Transport costs play a key role in agricultural markets in developing countries and are one of the causes of poverty amongst farmers that are geographically isolated. Another characteristic of agricultural markets is that they often involve interlinked transactions. However, the existing theoretical literature on interlinked transactions does not take into account the existence of transport costs. This paper develops a model of input-output interlinked contracts between geographically dispersed farmers and a trader, whether this trader is for-profit or non-profit. We derive implications of imposing either uniform or mill pricing policies, as opposed to spatial price discrimination. Impact on profit, farmers' income, level of production, social welfare and regional disparities are investigated.

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