Abstract
This study examines how local trading practices function as informal institutions in two regional wholesale markets (Dedicated Economic Centers (DECs)) in the highlands of Sri Lanka. The order-based system in the Nuwara Eliya DEC ensures price stability and lowers transaction risks. In the Keppetipola DEC, wholesalers play a key role in the market by acting as intermediaries between farmers and buyers. Despite the lack of formal institutional rules, both markets have created flexible and effective institutional frameworks. The findings suggest that structural arrangements and endogenous institutional formation based on local practices are necessary for sustainable market functioning.
