The effects of risk preference and transaction cost on the vertical coordination behavior of forage farmers

Abstract

[Objective] The participation of forage farmers in vertical coordination is an important way to solve the problem of insufficient forage supply and the loose connection of the forage industrial chain. This study aimed to explore the key factors that influence the participation of forage farmers in vertical coordination, in order to promote effective linkage between farmers and the market and improve the forage supply capacity. [Methods] A mathematical derivation model of forage farmers’ participation in vertical coordination was constructed from the perspective of internal risk preference and external transaction cost. Based on the survey data of farmers in typical forage-producing areas such as Gansu and Inner Mongolia in 2023, the multiple price list and multinomial logit model were used for empirical analysis. Robustness tests and heterogeneity analyses were also conducted. [Results] (1) The crucial role of internal risk preference in vertical coordination behavior cannot be ignored. Forage farmers with higher level of risk aversion tend to participate more in vertical coordination models of organizational collaboration, sales contract collaboration, and production contract collaboration to ensure transaction stability. (2) The information and execution costs not only directly affect the participation of forage farmers in vertical coordination but also positively regulate the participation of farmers with a high degree of risk preference in vertical coordination. (3) The information and execution costs of annual forage farmers have a significant direct effect on the vertical coordination behavior, while there is no significant impact for perennial forage farmers. The transaction cost of forage farmers in the Sickle Bay area has a significant direct impact and regulatory effect on the vertical coordination behavior, while there is no significant impact in the Huang-Huai-Hai area. [Conclusion] High degree of risk preference of farmers will have a significant inhibitory effect on participating in vertical coordination, while transaction costs will moderate the negative impact of risk preference. Future efforts should aim to enhance farmers’ awareness of the risks involved in forage production and management through both online and offline channels; encourage downstream organizations or enterprises to provide service systems for the integration of forage production and marketing; and improve the development of infrastructure such as communication networks and transportation in the Sickle Bay area.

Keywords

• risk preference|transaction cost|forage farmers|vertical coordination behavior|multiple price list