Sorting: The Function of Tea Middlemen in Taiwan during the Japanese Colonial Era

In a case study of Taiwan's tea industry during the Japanese colonial period, we identify an important function of middlemen: sorting. The transaction cost saved by the intermediary due to sorting is shown to be empirically significant. We also study other services provided by tea middlemen, including financing and transportation. These are shown to be by-products of an intermediary's job, rather than his essential contribution to trading.