The purpose of this paper is to study the development of transaction form and production area in flower horticulture. I focussed on the bargaining among some economical subjects which had been overlooked so far in studies of agricultural marketing. Then, using Williamson's transaction cost theory, I tried to analyze the transaction costs involved in agricultural marketing.

　In pre-modernistic wholesalers transaction form, farmers had to bear a lot of transaction costs, because pre-modernistic wholesalers abused the demand information impactedness opportunistically. The production area therefore consisted only of some farmers who could pay transaction costs and participate in the shipment guild. In order to save transaction costs, transaction was voluntarily changed to perfect competitive transaction in the modernistic wholesale market. This, however, led to the entry of not only other farmers in the one area but also from other production areas because of the decrease in transaction costs. As a result, an oligopoly was formulated within the flower market and again bargaining took place regarding wholesale services between oligopolistic wholesale dealers and oligopolistic production areas. Bilateral oligopolistic transaction in wholesale services caused the increase in transaction costs due to the opportunism of wholesale dealers. To nullify these transaction costs, farmers are being organized into the selling cooperatives which can establish customer relationships with fixed wholesale dealers. This transaction form saves transaction costs between the farmers and the cooperatives at the same time. I concluded that farmers had actively compared transaction forms and chosen the form of the least transaction costs.

　The intention of this paper is to present an econometrically proven direction for improving of vegetable price stabilization policies in the municipality of Kobe. For this purpose, the “contract-system of vegetable production” in Kobe is taken as an example and, the mechanism and economic effects of this system are analyzed, through econometrical methods.

　Firstly, the final bid price and the compensation for low prices involved in this system are described in terms of economic model. Secondly, model of purchased quantity and wholesale price is developed, assuming that the daily fluctuations of purchased quantity and wholesale price of the vegetables are stochastic variables when this system is not working.

　Various simulations are made by manipulating guaranteed standard prices, minimum standard prices, maximum wholesale prices, and rate of compensation.

　The following conclusions are derived: 1) the variation indices of daily selling priced tend to be larger since the daily marketing of vegetables cannot be carried out as planned, 2) the final bid price and compensation for low prices can, in some occasions, simultaneously occur, 3) according to the relation between the rate of compensation and the rate of market commission, excessive compensation for low prices can be made, and 4) the fluctuations in market prices can be mitigated by the system of bidding.

　Two approaches can be found within the existing theories regarding agricultural cooperatives. One is Demand-Supply Approach and the other is Game Theoretic Approach. The former successfully describes some institutional characteristics of cooperative, but it does not take account into the interaction of members or the characteristics of each member. On the contrary the latter does consider the interaction of members and characteristics of each member as well as the institutional characteristics. From this, Game Theoretic Approach can be said to be superior to Demand-Supply Approach. Nevertheless, this approach seems to be insufficient, especially regarding the assumption of members' behavior. In Game Theoretic Approach some assume the individual rationality of members, the other assume collective rationality. But neither of them cannot reflect real behaviors of the members.

　This paper assumes that members consider simultaneously both individual rationality and collective rationality. Needless to say, individual rationality is often inconsistent with collective rationality, Under such situation as Prisoner's Dilemma situation, the members inevitably struggle hard in order to equilibrate both rationalities. When members behave in this manner, the internal equilibrium of a cooperative can be different from usual one. In usual equilibrium, members aim at maximizing their own profit, and then fall into Prisoner's Dilemma situation. But the members with both rationalities can erase or dissolve the dilemma.

　From this analysis it can be said that one of the main characteristics of cooperative is the flexibility in dissolving Prisoner's Dilemma.