Vertical Co-ordanitaion in Transition Agriculture: a Hungarian Cooperative Case Study

The agriculture is traditional risky business, but in transition countries agricultural producers should face some additional difficulties. The agri-food chains are still suffering from underdeveloped market institutions creating severe barriers for price discovery and high transaction costs to co-ordinate market exchanges. Co-operatives are usually neglected as a possible governance structure in recent empirical analyses. This study analyzes the advantages and limitations of cooperatives for establishing an appropriate vertical coordination forms in the framework of transaction cost economics. We present a case study to show that at the recent stage of development in Hungarian agriculture co-operatives can solve some problems arising from missing and embryonic market institutions. We argue that the co-operative is a good example, how an agricultural co-operative can achieve some of the potential advantages, solving many “traditional” TCE and agency problems and serving its members with a continuing growth.

Random Matrix Filtering in Portfolio Optimization

We study empirical covariance matrices in finance. Due to the limited amount of available input information, these objects incorporate a huge amount of noise, so their naive use in optimization procedures, such as portfolio selection, may be misleading. In this paper we investigate a recently introduced filtering procedure, and demonstrate the applicability of this method in a controlled, simulation environment.Comment: 9 pages with 3 EPS figure

The Choice of Marketing Cooperative in a Transition Agriculture

The agriculture in transition countries can be described by considerable uncertainties. In these countries public institutions are ineffective in ensuring contract enforcement. The absence of enforceable contract to set up any kind of vertical co-ordination has become difficult. In addition, this creates severe barriers for price discovery involving high transaction costs to co-ordinate market exchanges. Although there is a wealth of literature on marketing cooperative, but research on their role in transition agriculture is scarce. This paper tries to contribute to this gap. In this paper we have analysed the potential benefits and costs of the marketing cooperatives in Hungary employing transaction cost economics framework. The results presented add to a small literature on the marketing cooperatives in transition agriculture. We found that the quantity, the existence of contract, flexibility and trust are the most important factor for farmers to selling their product via cooperative. The cluster analysis provides some additional insights regarding farmers' choices. Namely, direct benefits including price, input finance extension services and speed of payments from cooperative membership have also important role. The most striking result is that the diversification and reputation has positive influences on the share of cooperative. Furthermore, large farmers have less willingness to sell their product to the cooperative. Surprisingly, asset specificity has rather negative effects on the share of cooperative.Agribusiness,

THE IMPACT OF TRUST ON COOPERATIVE MEMBERSHIP PERFORMANCE AND SATISFACTION IN THE HUNGARIAN HORTICULTURE

The paper investigates the impacts of trust on the relationships among members and between members and the management in an agricultural marketing cooperative in the Hungarian horticultural sector. We focus on the effects of trust on cooperative members performance and satisfaction and their commitment to remaining a part of cooperative. We analyse the trust along two dimensions: cognitive and affective. Our results suggest that trust among cooperative members and trust between cooperative and management have positive effects on group cohesions. In line with a priori hypotheses we found differences between cognitive and affective trust influencing the group cohesion and cooperative members satisfaction.trust, marketing cooperative, Hungary, Farm Management, Marketing,

Price transmission in the Hungarian vegetable sector

In this paper we analyse price transmission for the carrot, parsley, tomato, green pepper and potato markets. Although there is a dual farm structure dominated by small individual farms, our results imply that price information flows from the producer to the retail level for potatoes, parsley and carrots. Our results also suggest that farmers do not merely accept prices, but can actually influence market prices. Tomato and green pepper prices have large transmission elasticities, and causality runs from the retail to producer level. It therefore follows that tomato and green pepper producers tend to accept prices and that the sector’s prices are determined by upper market levels (processors, wholesalers, retailers). These results are reinforced by the fact that vegetable producers sell a large share of their production through procurement and processing, and therefore are more dependent on the upstream industries, and thus cannot influence prices. For all vegetables in this study the short-run price transmission is symmetric while on the tomato market the long-run price transmission is asymmetric. Results indicate that the tomato market is not competitive and efficient; therefore processors, wholesalers, and retailers are capable of exercising market power, and can instantly transmit producer price increases while just slowly and partially transmitting producer price decreases.Hungarian vegetable sector, producer prices, price transmission, Demand and Price Analysis, Crop Production/Industries,

Vertical Co-ordanitaion in Transition Agriculture: a Hungarian Cooperative Case Study

The agriculture is traditional risky business, but in transition countries agricultural producers should face some additional difficulties. The agri-food chains are still suffering from underdeveloped market institutions creating severe barriers for price discovery and high transaction costs to co-ordinate market exchanges. Co-operatives are usually neglected as a possible governance structure in recent empirical analyses. This study analyzes the advantages and limitations of cooperatives for establishing an appropriate vertical coordination forms in the framework of transaction cost economics. We present a case study to show that at the recent stage of development in Hungarian agriculture co-operatives can solve some problems arising from missing and embryonic market institutions. We argue that the co-operative is a good example, how an agricultural co-operative can achieve some of the potential advantages, solving many traditional TCE and agency problems and serving its members with a continuing growth

Analytic approach to variance optimization under an (1) constraint

The optimization of the variance of a portfolio of N independent but not identically distributed assets, supplemented by a budget constraint and an asymmetric (1) regularizer, is carried out analytically by the replica method borrowed from the theory of disordered systems. The asymmetric regularizer allows us to penalize short and long positions differently, so the present treatment includes the no-short-constrained portfolio optimization problem as a special case. Results are presented for the out-of-sample and the in-sample estimator of the regularized variance, the relative estimation error, the density of the assets eliminated from the portfolio by the regularizer, and the distribution of the optimal portfolio weights. We have studied the dependence of these quantities on the ratio r of the portfolio's dimension N to the sample size T, and on the strength of the regularizer. We have checked the analytic results by numerical simulations, and found general agreement. Regularization extends the interval where the optimization can be carried out, and suppresses the large sample fluctuations, but the performance of (1) regularization is rather disappointing: if the sample size is large relative to the dimension, i.e. r is small, the regularizer does not play any role, while for r's where the regularizer starts to be felt the estimation error is already so large as to make the whole optimization exercise pointless. We find that the (1) regularization can eliminate at most half the assets from the portfolio (by setting their weights to exactly zero), corresponding to this there is a critical ratio r = 2 beyond which the (1) regularized variance cannot be optimized: the regularized variance becomes constant over the simplex. These facts do not seem to have been noticed in the literature