Information Costs and Customary Prices
Gathering information is costly; when does it pay to reduce uncertainty by obtaining new information? This chapter considers how the costs and benefits of collecting information affect pricing patterns in tribal trading situations, and how customary prices may be a way of reducing risk in such transactions. In particular, I will argue that the cost of getting current information about supply and demand is especially high where there are neither marketplaces nor middlemen. In such cases customary prices reduce the risk of erratic price fluctuations, which would otherwise occur when trade is conducted in the absence of good information. Prices set by custom appear to be a long-established tradition in Botswana, and I recorded many instances of it during my fieldwork there in 1975–77. Unfortunately, it did not occur to me that this was an unusual fact that required explaining until I had already returned from the field. In order to test the general arguments that I later developed, I have turned to the cross-cultural literature. I begin with a brief summary of trading patterns that I observed in Botswana along the Boteti River, in order to illustrate the nature of the problem. I then develop some general arguments that predict the circumstances under which we will find trade with customary prices. Finally, I discuss the cross-cultural (HRAF) data that I used to evaluate these arguments.
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