In 2008, economist Eleni Gabre-Mahin established the Ethiopian Commodity Exchange (ECX) with the exclusive right to trade coffee. The Exchange mixed the raw beans from different sources before auction.

Explain the asymmetry of information between coffee growers and buyers at the ECX.

Explain why the mixing weakened the incentive of growers to improve quality.

From 2017, the government allowed growers to separate the beans until auction. How would this affect market prices and production?

Answer rating: 100% (QA)

1 Asymmetry of Information at the ECX The asymmetry of information refers to a situation where one party involved in a transaction has more or better information than the other party In the case of th... View the full answer