• Commodity markets;
  • inter-temporal arbitrage;
  • Kenya;
  • liquidity;
  • maize;
  • seasonality;
  • storage
  • O13;
  • O12;
  • Q12;
  • D91


We use a simple theoretical model of seasonal market participation in the presence of liquidity constraints and transaction costs to explain the ‘sell low, buy high’ puzzle in which some households do not take advantage of inter-temporal price arbitrage through storage and sell output postharvest at prices lower than observed prices for purchases in the subsequent lean season. We test our model with data from western Kenya using maximum likelihood estimation of a multivariate sample selection model of market participation. Access to off-farm income and credit indeed seem to influence crop sales and purchase behaviours in a manner consistent with the hypothesised patterns.