Bargaining power, market risk, and coordination costs in the cassava starch marketing channel in Thailand: a three stage principal-agent model and application

Abstract

This study examined bargaining power, market risk and coordination costs in the Thailand cassava starch marketing channel using a three-stage principal-agent marketing channel model and annual data over the period 1980-2015. The empirical results of the econometrics analysis revealed that the fixed compensations for producers decreased over the period of study and reached negative levels in 1999 and 2008-2015. The fixed compensations for the wholesalers were positive and increased over the period of study. In general, the producers were risk seeking, whereas the wholesalers were risk averse over the study period. The processors being risk neutral bear more risk in the marketing channel than producers and wholesalers, while the producers bear more risk than the wholesalers. The coordination cost of the marketing channel showed negative trending pattern over the period of study. The findings have implications for the development of the cassava industry in Thailand.