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THIS IS A WORKING DRAFT. PLEASE DO NOT CITE WITHOUT PERMISSION OF THE AUTHOR. In order to meet increasing demand and boost self-sufficiency, Malaysia wants to strengthen the production and marketing of domestic dairy products. This study aims at explaining Malaysian dairy farmers’ marketing channel selection based on transaction cost theory. A multivariate probit analysis is used to explain 200 farmers’ selection between three non-mutually exclusive marketing channels: through (i) the government, (ii) direct selling or (iii) intermediaries. Our results highlight the dependency among the market channel choices and identify the following influential factors: price expectation, delay of payment, trust in buyer, price fluctuation, price expectation and provision of farm services.


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