Making markets work: Modeling agri-food systems in transition

Despite a decade of transition, the agri-food sectors of the former command economies consistently underperform relative to their potential. Underprod uction and underinvestment are generally observed. This paper develops a mo del of bilateral monopoly linkages between firms along an agri-food supply chain. In the absence of competitive market forces and an efficient system of commercial law, deficient production and investment should be expected. If the agri-food sectors of the former command economies are to realize the ir potential, more resources will have to be devoted to reducing the transa ction costs associated with broadening markets and enforcing contracts.