GROWER’S CHOICE ON TRADING PARTNER IN APPLE MARKETS IN NORTHWERTERN CHINA

Abstract

Based on the mathematical analysis of dominant exchange partners in agriculture, we provide a methodology from the perspective of transaction cost that can be used to deal with the relevance of fixed and proportional transaction costs related characteristics to grower choice behavior on trading partner employing multinomial logit regression model consistent with a sample of 351 apple growers collected in field survey in northwestern China. The descriptive statistics results reveal strongly a relationship amongst geographical location of farm households, contractual relationships and grower’s choice on trading partner. The empirical findings indicate that proportional transaction costs related factors have significant correlation with choice behavior on trading partner in apple market. The findings call for a greater attention to establish the trust mechanism and to regulate contractual relationship between exchangers. Encouragement in cooperatives participation of small-scale growers is also highly recommended to mitigate the proportional transaction costs and thereafter to increase agricultural incomes of farm household.