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Incentive Provision and Coordination Costs in Food-Marketing Channels: A Multi-Stage Channel-Agency Theory Perspective

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  • Kuwornu, John K.M.
  • Kuiper, W. Erno
  • Pennings, Joost M.E.
  • Meulenberg, Matthew T.G.

Abstract

Food-supply chains have become extensively vertically coordinated through the use of contracts as an organizational response to satisfy the needs of consumers in the saturated food markets of the industrialized countries. The contracts involved must establish an optimal trade-off between incentive provision and risk reduction. Agency theory can be used to model this trade-off. We show how to do this in a three-stage (producer, wholesaler, retailer) principal-agent supply-chain model. Its application to the Dutch supply chain of ware potatoes shows that during the period 1961-2002, retailers have been able to provide more incentives to the wholesalers and producers and as a consequence the costs of coordination in the supply chain decreased.

Suggested Citation

  • Kuwornu, John K.M. & Kuiper, W. Erno & Pennings, Joost M.E. & Meulenberg, Matthew T.G., 2005. "Incentive Provision and Coordination Costs in Food-Marketing Channels: A Multi-Stage Channel-Agency Theory Perspective," Journal of Food Distribution Research, Food Distribution Research Society, vol. 36(1), pages 1-6, March.
    • Handle: RePEc:ags:jlofdr:26758
    DOI: 10.22004/ag.econ.26758
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    References listed on IDEAS

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    4. Boehlje, Michael D. & Hofing, Steven L. & Schroeder, R. Christopher, 1999. "Value Chains in the Agricultural Industries," Staff Papers 200409, Purdue University, Department of Agricultural Economics.
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