Mechanisms for coordinating decisions of agricultural producers in small regional markets with limited capacity

In many agricultural regions of the world, small agricultural markets are emerging, where local producers satisfy local demand. For many such markets, particularly in mountainous regions, the costs of entering a regional market are prohibitively high for individual producers. The purpose of the research is to develop mechanisms for improving production efficiency in such markets, defined in the literature as local markets with limited capacity. In such markets, equilibrium parameters depend on the coordination of strategic decisions among many independent producers. Materials and Methods. The empirical basis of this study is formed by field data on the local agricultural markets in the Kabardin-Balkar Republic. The methodological core is the framework of mathematical game theory. Using Bayesian games with nature, we explore economic coordination mechanisms at the local level under conditions of imperfect information. A game in which the state of nature is the aggregate of decisions of all other producers is adopted as a model of the behavior of an individual agricultural producer. As a result of present research, two coordination mechanisms were developed for this type of market, based on the order of choice and the restriction of crop selection options by producers, respectively. A comparative analysis of the production structure resulting from the implementation of these mechanisms is conducted using the example of a local market, geographically located near the Kavkaz Highway on the Stary Cherek – Khatuey section. Discussion and Conclusion. The proposed mechanisms differ in the equilibrium parameters. The first of the mechanisms ensures an egalitarian distribution of profits but is effective only under approximately equal specific returns across production options. The second increases aggregate producer profits and ensures an ex post Pareto-efficient distribution. The resume is that the use of order-based mechanism leads to a uniform distribution of expected profits at the expense of overall efficiency losses. The use of restriction-based mechanism either maximizes producers' total income or ensures that every participant will be in profits. The results obtained can be used for the practical implementation of the developed mechanisms for coordinating agricultural producers' decisions at the local level

Agricultural productivity · Agriculture · Game theory · Imperfect · Agricultural Development and Policies · Digitalization and Economic Development in Agriculture · Educational Technology and Optimization