Search Costs in Identity-Preserved Agricultural Markets

Jeffrey J Reimer 1
  • 1 Oregon State University

Many industries have "match-maker" institutions that help agents make links to one another by reducing search costs. Such institutions are now emerging in niche farm and food markets. In this study I provide an explanation for such institutions with a theoretical model of a niche market channel involving a small producer, retailer, and variety-loving consumer. I focus on the process by which producers are connected to retailers, and show that search costs between producers and retailers can be an important fixed cost of entry. Reduced search costs result in a larger number of matches, and facilitate the growth of niche market channels selling on the basis of producer identity. I examine the role of consumer preferences, retailer bargaining power, and other key features of these markets.

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The Journal of Agricultural & Food Industrial Organization (JAFIO) is a unique forum for empirical and theoretical research in industrial organization with a special focus on agricultural and food industries worldwide. JAFIO is the only international journal devoted solely to theoretical and empirical industrial organization as applied to agricultural and food systems which link input suppliers, farmers, processors, and retailers.