A Study on the Vertical Coordination of the Egg Industry in Taiwan
Date Issued
2011
Date
2011
Author(s)
Liu, Cheng-Yen
Abstract
Eggs are important agricultural products consumed daily by Taiwanese people. However, its marketing system remains as an “underwriting” system where wholesalers promise egg farmers that they will purchase all their production. Under this institution, egg farmers don’t care about the market situation and concentrate their attention on producing as much as they can. Wholesalers, in return, alone determine the wholesale price offered to farmers. This wholesale price then decides what the retail prices will be. Apparently, this pricing system is not fair to farmers and provide no incentive for farmers to improve the quality of their eggs.
Years ago scholars proposed methods to solve this problem which benefit both farmers and wholesalers benefit. However, nothing changed in past decades and “underwriting system” still prevails until today. Thus this thesis tries to solve this issue through the study of the issue of vertical integration of egg industry. The analytical method is organization economics and case study of egg farmers, wholesalers and their organization, marketing cooperatives, and governmental agent is applied. Organization economics is different from traditional neoclassical economics. It uses some postulates about human behaviors and transaction characteristics and emphasizes the importance of institutions in effecting the choice of governance structure among the related agents in egg industry.
This study concludes that vertical integration of egg farmers and wholesalers should be adopted. In addition, current marketing cooperative of egg farmers should be reorganized toward a “New generation cooperative” type where the interests of both cooperative members and cooperatives can be strengthened. A quality grading system for eggs should also be adopted to provide economic incentives for farmers. To achieve all these, egg wholesale market must be established where eggs of different qualities are graded, priced and traded. Under this new system of trading, scale economy will be achieved and marketing efficiency will be raised, too.
Subjects
Egg
Organizational Economics
Vertical Coordination
Integration
Type
thesis
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