Do Transaction Costs and Risk Preferences Influence Marketing Arrangements in the Illinois Hog Industry?
AbstractRisk reduction and transaction costs are often used to explain contracting in the U.S. hog industry with little empirical support. Using a unified conceptual framework that draws from risk behavior and transaction cost theories, in combination with unique survey and accounting data, we demonstrate that risk preferences and asset specificity impact Illinois producersâ€™ use of contracts and spot markets. In particular, producersâ€™ investments in specific hog genetics and human capital are related to selection of long-term marketing contracts over spot markets. Producers who perceive greater levels of price risk and/or are more averse are more (less) likely to use contracts (spot markets).
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.
Volume (Year): 34 (2009)
Issue (Month): 2 (August)
asset specificity; contracts; hogs; risk attitude; risk behavior; risk perception; transaction costs economics; Livestock Production/Industries; Risk and Uncertainty;
Other versions of this item:
- Franken, Jason R.V. & Pennings, Joost M.E. & Garcia, Philip, 2008. "Do Transaction Costs and Risk Preferences Influence Marketing Arrangements in the Illinois Hog Industry?," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37599, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joost M. E. Pennings, 2004. "Channel Contract Behavior: The Role of Risk Attitudes, Risk Perceptions, And Channel Members' Market Structures," The Journal of Business, University of Chicago Press, vol. 77(4), pages 697-724, October.
- Joost M.E. Pennings & Ale Smidts, 2000. "Assessing the Construct Validity of Risk Attitude," Management Science, INFORMS, vol. 46(10), pages 1337-1348, October.
- Nigel Key & William McBride, 2003. "Production Contracts and Productivity in the U.S. Hog Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 121-133.
- Jill E. Hobbs, 1997. "Measuring the Importance of Transaction Costs in Cattle Marketing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1083-1095.
- Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-85, March.
- Johnson, C. Scott & Foster, Kenneth A., 1994. "Risk Preferences And Contracting In The U.S. Hog Industry," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 26(02), December.
- Claude Ménard & Peter G. Klein, 2004. "Organizational Issues in the Agrifood Sector: Toward a Comparative Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 750-755.
- Brian P. Cozzarin & Randall E. Westgren, 2000. "Rent Sharing in Multi-Site Hog Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(1), pages 25-37.
- Jeffrey J. Reimer, 2006. "Vertical Integration in the Pork Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 234-248.
- Christopher G. Davis & Jeffrey M. Gillespie, 2007. "Factors Affecting the Selection of Business Arrangements by U.S. Hog Farmers," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(2), pages 331-348.
- Davidson, Russell & MacKinnon, James G, 1981.
"Several Tests for Model Specification in the Presence of Alternative Hypotheses,"
Econometric Society, vol. 49(3), pages 781-93, May.
- Russell Davidson & James G. MacKinnon, 1980. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Working Papers 378, Queen's University, Department of Economics.
- Key, Nigel D., 2004. "Agricultural Contracting and the Scale of Production," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 33(2), October.
- Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
- Mahoney, Joseph T. & McNally, Regina C., 2004. "Explaining and Predicting the Choice of Organizational Form: Integrating Performance Ambiguity and Asset Specificity Effects," Working Papers 04-0109, University of Illinois at Urbana-Champaign, College of Business.
- Claude Ménard & Peter G. Klein, 2004. "Organizational Issues in the Agrifood Sector: Toward a Comparative Approach," Industrial Organization 0401005, EconWPA.
- Martinez, Stephen W., 2002. "Vertical Coordination Of Marketing Systems: Lessons From The Poultry, Egg, And Pork Industries," Agricultural Economics Reports 34051, United States Department of Agriculture, Economic Research Service.
- Lajili, Kaouthar & Barry, Peter J. & Sonka, Steven T. & Mahoney, Joseph T., 1997. "Farmers' Preferences For Crop Contracts," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(02), December.
- Scott E. Masten & Stéphane Saussier, 2000. "Econometrics of Contracts : an Assessment of Developments in the Empirical Literature on Contracting," Revue d'Économie Industrielle, Programme National Persée, vol. 92(1), pages 215-236.
- Franken, Jason R.V. & Parcell, Joseph L., 2012. "Evaluation of Market Thinness for Hogs and Pork," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 44(04), November.
- Du, Xiaoxue & Lu, Liang & Zilberman, David, 2013. "The Economics of Contract Farming: A Credit and Investment Perspective," 2014 Allied Social Science Association (ASSA) Annual Meeting, January 3-5, 2014, Philadelphia, PA 161657, Agricultural and Applied Economics Association.
- Alemu, Abebe Ejigu & Mathijs, Erik & Maertens, Miet & Deckers, Jozef A. & Gebregziabher, Kidanemariam & Baur, Hans & Gebrehiwot, Kindeya, 2011. "Trader-supplier Coordination in the Agrifood Supply Chains in Northern Ethiopia," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114218, European Association of Agricultural Economists.
- Chris Boessen & Joe Parcell & Jason Franken & John Lawrence & Ron Plain & Glenn Grimes, 2010. "Producer perceptions and attitudes toward hog marketing contracts," Agribusiness, John Wiley & Sons, Ltd., vol. 26(3), pages 405-424.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.