Assessing the dimensions of transaction cost in the poultry industry: The case of the Ashanti Region of Ghana

Abstract

This paper analyzes the dimensions of transaction cost in the poultry industry. We analyze asset specificity, frequency, uncertainty, and opportunism in the poultry industry in the Ashanti Region in Ghana. We examine these dimensions for all firms in the production chain: input suppliers, wholesalers, and retailers. The empirical analyses for the industry consisting of 128 firms (18 input suppliers, 50 farmers, 20 wholesalers, and 40 retailers) reveal that retailers assets are specific and cannot be redeployed for other purposes; retailers experience some opportunistic (self-seeking) behavior from trading partners (i.e., producers, wholesalers, or both), and wholesalers also experience opportunism from their trading partners (i.e. producers, retailers, or both). The assets of input suppliers and producers are not specific and can be redeployed for other purposes. Transaction was frequent and certain for all the firms in the industry. Based on these results we recommend that retailers should have market-contract relationships with both wholesalers and farmers to safeguard themselves against the hazards of opportunistic behavior, as their assets are specific. Furthermore, wholesalers should also have some market-contract relationship with farmers to protect them from farmers’ opportunistic behavior.