Transaction Cost Estimation in Vegetable Marketing Involving Modern Food Retail Chains: Impact on Profitability of Growers Kedar Vishnu (a*), Chengappa P G (b**)
a) Assistant Professor, Department of Data Science, CHRIST (Deemed to be University), Pune, 412112 India. *kedar.vishnu[at]christuniversity.in
b) Former Vice Chancellor, University of Agricultural Sciences, Bangalore 560 092, India. **chengappapg[at]gmail.com
Abstract
This paper is an attempt to empirically measure the Transaction Costs (TC) incurred by the farmers across different Modern Food Retail Chains (MRFC). Evidences from existing studies indicate that MFRCs tend to behave opportunistically towards farmers due to an incomplete contract, lack of enforcement and asymmetric information. We estimated the TC using the primary data collected in the year 2017 through a structured and pre-tested schedule administered to 100 each randomly chosen tomato and green chilli farmers in Kolar district, India. The farmers were categorised in to three categories- farmers undertaking production contract, marketing contract and traditional farmers selling their produce in spot markets. A non-parametric propensity score matching estimator was used for measuring the asymmetric information (AS) and opportunistic behaviour (OB) by MFRCs. From our analysis it is inferred that AS and OP together reduced the tomato smallholders profit by 14.5 %. A breakup of TC indicated, monitoring cost accounting for 65% followed by negotiation cost (28.7%) and information cost (6.3%). These findings have far reaching policy implications to reduce transaction costs and improve the profitability of vegetable growers.
Keywords: Agricultural Policy, Modern Food Retail Chains, Transaction Cost and Asymmetric Information
