A transaction cost analysis of finished beef marketing in the United Kingdom
This thesis presents an analysis of finished beef marketing in the UK using Transaction Cost Economics (TCE). Transaction costs fall into three broad categories: information costs, negotiation costs and monitoring or enforcement costs. The key insight provided by TCE is that economic activity will be organised, ceteris paribus, so as to minimise the costs of carrying out transactions. Empirical applications of TCE have not kept pace with theoretical developments partly due to data limitations; in particular, there have been few applications of TCE by agricultural economists. Data on the transaction costs which farmers face when marketing finished beef cattle are collected through a survey of beef producers in N.E. Scotland. These data are analysed using Tobit analysis - a limited dependent variable econometric technique. A number of transaction cost and farm characteristic variables are found to be significant in influencing a farmer's decision whether to sell cattle through the live-ring auction or direct to abattoirs. The influence of transaction costs on abattoirs' cattle procurement preferences are then examined using conjoint analysis. This technique allows the joint effect of two variables on a dependent variable to be measured. Procurement channels are described in terms of four key transaction cost attributes. Data from a survey of UK abattoirs allows the extent to which respondents are willing to trade-off attribute levels, and therefore, the relative importance of the transaction cost attributes, to be determined. Conjoint analysis is also used to measure the relative importance of transaction costs in the procurement decisions of retailers, through a small-scale survey of UK supermarket meat buyers. The main contribution of this study is to demonstrate that measuring the importance of transaction costs to the parties to an exchange is a fruitful avenue of research.