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Transaction costs and slaughter cattle procurement: Processors' selection of supply channels

Authors
Disciplines
  • Communication
  • Law

Abstract

This article investigates the hypothesis that different supply channels impose different types (and levels of) transaction costs on beef processors in the United Kingdom. The choice of supply channel is therefore influenced by these transaction costs. Recent food safety legislation and increasing consumer concerns over farm animal welfare may have altered the transaction costs arising from different supply channels. Conjoint analysis is used to measure the relative importance of selected transaction costs in a processor's procurement decision. A survey of UK beef processing firms is used to collect data for the conjoint analysis. The results suggest that the monitoring costs arising from the traceability of cattle to the farm of origin are particularly important. The implications for vertical coordination in the beef marketing chain are discussed. © 1996 John Wiley & Sons, Inc.

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