Electronic Commodity Market System for Food Networks

Abstract

On the agricultural market, like any other market, there are transaction costs such as "discovering what the relevant prices are, the costs of negotiating and concluding a separate contract for each exchange transaction", and others. According to our research the average level of transaction costs in Russia for small and medium-sized enterprises is about 28% of the total cost.

If the transaction costs of agricultural market are high, in order to reduce them entrepreneurs can arrange the additional production of goods within the firm, replacing market relationships on the relations within the firm.

For example, in Russia, the large grain producers often have their own storage of grain (elevators) and mills, bakeries and even shops, because it is more profitable. This option is to reduce transaction costs leads to integration of firms and the monopolization of the economy.

The second option - is to establish the market long-term relationships with suppliers and customers, and long-term contracts....