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Strategic Interactions, Risks and Coordination Costs in Food Marketing Channels: The Mediating Role of Futures Markets

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  • Kuwornu, John K.M.
  • Kuiper, W. Erno
  • Pennings, Joost M.E.
  • Meulenberg, Matthew T.G.

Abstract

We examine the interaction of marketing channel members and the influence of these interactions on incentives, coordination costs, and risk allocation strategies in a food marketing channel. For this purpose we specify a three-stage principal-agent marketing channel model involving producers, wholesalers, retailers and a futures market. We compare the situation with and without futures market. The empirical results regarding the Dutch ware potato marketing channel during 1971-2003 reveals that, possibly as a result of increases in incentives to producers and wholesalers, the coordination costs of the marketing channel decreased significantly, both with and without futures trade. The coordination costs of a marketing channel with a futures market are lower than without futures, demonstrating the price discovery role of the futures markets. The results also show that risk shifted from retailers to producers and wholesalers.

Suggested Citation

  • Kuwornu, John K.M. & Kuiper, W. Erno & Pennings, Joost M.E. & Meulenberg, Matthew T.G., 2006. "Strategic Interactions, Risks and Coordination Costs in Food Marketing Channels: The Mediating Role of Futures Markets," 99th Seminar, February 8-10, 2006, Bonn, Germany 7740, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae99:7740
    DOI: 10.22004/ag.econ.7740
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    References listed on IDEAS

    as
    1. W. Erno Kuiper & Joost M. E. Pennings, 2002. "Identification by full adjustment: evidence from the relationship between futures and spot prices," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 29(1), pages 67-84, March.
    2. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-328, March.
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    Cited by:

    1. Endro Gunawan & John K. M. Kuwornu & Avishek Datta & Loc T. Nguyen, 2019. "Farmers’ Perceptions of the Warehouse Receipt System in Indonesia," Sustainability, MDPI, vol. 11(6), pages 1-21, March.

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    Agribusiness; Marketing;

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