Quality and contractual choice: a transaction cost approach to the polish hog market

This paper analyses the marketing arrangements between Polish hog producers and buyers at a time when high‐quality markets are emerging. Interrelationships between four key factors are investigated: governance structures, prices, grading and investment in quality production. A sample of 200 Polish hog producers is analysed. A multinomial logit analysis indicates that producers' choice between large processors as opposed to traders and local slaughterhouses can be predicted by type of contract, grading and quality. A cluster analysis reveals four distinct groups of farmers according to investment in specific assets, ability to safeguard assets, degree of coordination with buyers, use of grading and written contracts, and extent of bargaining power.