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Abstract

This paper surveys some recent developments in contract theory and illustrates how this theory might be useful for conceptualising policy issues related to vertical coordination and contracting in the agro-food industry. The article begins by surveying contract theory to identify key economic distortions that can potentially justify government involvement. Next, the general ingredients of agricultural contracts that are most likely to create inefficiencies are discussed. Finally, controversial aspects of real-world agricultural contracts are highlighted and lessons from the theory are used to determine whether government intervention is justified. Actual legislation that has been proposed in the USA is analysed where appropriate and topics that await further research are also discussed.

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File URL: http://purl.umn.edu/116979
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Bibliographic Info

Article provided by Australian Agricultural and Resource Economics Society in its journal Australian Journal of Agricultural and Resource Economics.

Volume (Year): 50 (2006)
Issue (Month): 4 (December)
Pages:

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Handle: RePEc:ags:aareaj:116979

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Postal: AARES Central Office Manager, Crawford School of Public Policy, ANU, Canberra ACT 0200
Phone: 0409 032 338
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Related research

Keywords: agricultural policy; industrial organisation; information; institutional economics; Agricultural and Food Policy;

References

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1. Orana Bandiera & Iwan Barankay & Imran Rasul, 2005. "Social preferences and the response to incentives: Evidence from personnel data," Natural Field Experiments 00212, The Field Experiments Website.
   
   • Oriana Bandiera & Iwan Barankay & Imran Rasul, 2005. "Social Preferences and the Response to Incentives: Evidence from Personnel Data," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 917-962, August.
2. Oliver Hart & John Moore, 1998. "Foundations of Incomplete Contracts," Harvard Institute of Economic Research Working Papers 1846, Harvard - Institute of Economic Research.
   
   • Hart, Oliver & Moore, John, 1999. "Foundations of Incomplete Contracts," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 115-38, January.
   • Oliver Hart & John Moore, 1998. "Foundations of Incomplete Contracts," NBER Working Papers 6726, National Bureau of Economic Research, Inc.
3. Georg Nöldeke & Klaus M. Schmidt, 1992. "Option Contracts and Renegotiation - A Solution to the Hold-Up Problem," Discussion Paper Serie A 417, University of Bonn, Germany, revised Aug 1993.
   
   • Georg Noldeke & Klaus M. Schmidt, 1995. "Option Contracts and Renegotiation: A Solution to the Hold-Up Problem," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 163-179, Summer.
4. Philippe Aghion & Jean Tirole, 1994. "Formal and Real Authority in Organizations," Working papers 95-8, Massachusetts Institute of Technology (MIT), Department of Economics.
   
   • Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
   • Aghion, P. & Tirole, J., 1997. "Formal and real authority in organizations," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
   • Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
   • Philippe Aghion & Jean Tirole, 1994. "Normal and Real Authority in Organizations," Working papers 94-13, Massachusetts Institute of Technology (MIT), Department of Economics.
   • Aghion, Philippe & Tirole, Jean, 1994. "Formal and Real Authority in Organizations," IDEI Working Papers 37, Institut d'Économie Industrielle (IDEI), Toulouse.
5. Jonathan Levin, 2000. "Relational Incentive Contracts," Working Papers 01002, Stanford University, Department of Economics.
   
   • Jonathan Levin, 2003. "Relational Incentive Contracts," American Economic Review, American Economic Association, vol. 93(3), pages 835-857, June.
6. Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
   
   • Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
   • Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
7. Theofanis Tsoulouhas & Tomislav Vukina, 2001. "Regulating Broiler Contracts: Tournaments Versus Fixed Performance Standards," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 1062-1073.
   
   • Tsoulouhas, Theofanis & Vukina, Tomislav, 2000. "Regulating Broiler Contracts: Tournaments Versus Fixed Performance Standards," 2000 Annual meeting, July 30-August 2, Tampa, FL 21833, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
8. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
9. Steven Wu & Brian Roe, 2006. "Tournaments, Fairness, and Risk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 561-573.
10. Steven Wu & Brian Roe, 2005. "Behavioral and Welfare Effects of Tournaments and Fixed Performance Contracts: Some Experimental Evidence," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(1), pages 130-146.
11. Alan Schwartz & Robert Scott, . "Contract Theory and the Limits of Contract Law," Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy Working Paper Series yale_lepp-1011, Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy.
12. repec:feb:natura:0014 is not listed on IDEAS

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Cited by:

1. Dell'Aquila, Crescenzo & Petriccione, Gaetana, 1. "The EU Fruit and Vegetable Sector in the Post 2013 CAP Scenario," Politica Agricola Internazionale - International Agricultural Policy, Edizioni L’Informatore Agrario, issue 1.
2. Martino, Gaetano & Frascarelli, Angelo, 2012. "Adaptation in Food Networks: theoretical framework and empirical evidences," MPRA Paper 37600, University Library of Munich, Germany.
3. Martino, Gaetano & Frascarelli, Angelo, 2012. "Adaptation in Food Networks: Theoretical Frame Work and Empirical Evidences," 2012 International European Forum, February 13-17, 2012, Innsbruck-Igls, Austria 144981, International European Forum on Innovation and System Dynamics in Food Networks.

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