The Choice of Marketing Cooperative in a Transition Agriculture

The agriculture in transition countries can be described by considerable uncertainties. In these countries public institutions are ineffective in ensuring contract enforcement. The absence of enforceable contract to set up any kind of vertical co-ordination has become difficult. In addition, this creates severe barriers for price discovery involving high transaction costs to co-ordinate market exchanges. Although there is a wealth of literature on marketing cooperative, but research on their role in transition agriculture is scarce. This paper tries to contribute to this gap. In this paper we have analysed the potential benefits and costs of the marketing cooperatives in Hungary employing transaction cost economics framework. The results presented add to a small literature on the marketing cooperatives in transition agriculture. We found that the quantity, the existence of contract, flexibility and trust are the most important factor for farmers to selling their product via cooperative. The cluster analysis provides some additional insights regarding farmers' choices. Namely, direct benefits including price, input finance extension services and speed of payments from cooperative membership have also important role. The most striking result is that the diversification and reputation has positive influences on the share of cooperative. Furthermore, large farmers have less willingness to sell their product to the cooperative. Surprisingly, asset specificity has rather negative effects on the share of cooperative.