Transactions Costs Approach and Application to Vertical Coordination Arrangements in Moroccan Apple Marketing

Abstract

In Morocco, agricultural aggregation projects (AAP) have been launched since a decade as being a form of vertical coordination aimed at correcting the marketing failure associated with spot markets arising due to information asymmetry as being behind the risks in marketing decision-making. AAP is considered to be the keystone of national agriculture, making it possible to overcome the diffi-culties linked to the size of farms. However, the scale of the transaction costs in agricultural aggregation projects (AAP) of the local apple producers remains so far less understood. The objective of this study is to investigate whether ex-ante costs of negotiating an AAP and the expost costs influence the adoption of relational transactions in Moroccan agricultural marketing and measure the social costs that are not common in previous studies, thus contributing to the development of literature. The study revealed that the transaction costs of this project total approximately 1207600 MAD. In this study, the abovementioned issues were investigated using a propensity score matching technique through a binary probit model to examine the transaction costs faced by apple producers members in agricultural aggregation projects and non-aggregated members, and therefore investigate the role of contract arrangements in reducing the aforementioned costs using a questionnaire-based survey in Atlas Mountains of Morocco. Results showed that the cost of negotiation and enforcement costs were revealed as the main variables which impede apple producers' participation in aggregation marketing, while the costs related to information search, harvesting, and transportation were the main obstacles to the participation of the non-aggregated members in the traditional spot market. Results also highlighted that the large-scale producers would be highly advantageous in aggregation projects compared to smallholder farmers.