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Oligopsony Power, Asset Specificity, and Hold-Up: Evidence from the Broiler Industry

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  • Tomislav Vukina
  • Porametr Leegomonchai
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    Abstract

    In this article we look for empirical evidence of hold-up in broiler industry production contracts by using the cross-sectional national survey of broiler growers. First, we focus on the problem of under-investment and hypothesize that the degree of agent's (grower's) under-investment systematically depends on the principal's (integrator's) market power and the level of asset specificity. Second, we provide an indirect test of hold-up by looking at the grower contract payoffs as a function of the frequency of the housing facilities upgrade requests and the principal's market power. The results show moderate empirical support for the presence of hold-up. Copyright 2006, Oxford University Press.

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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2006.00881.x
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    Bibliographic Info

    Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

    Volume (Year): 88 (2006)
    Issue (Month): 3 ()
    Pages: 589-605

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    Handle: RePEc:oup:ajagec:v:88:y:2006:i:3:p:589-605

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    Cited by:
    1. Nisvan Erkal, 2003. "Buyer-Supplier Interaction, Asset Specificity, And Product Choice," Department of Economics - Working Papers Series 885, The University of Melbourne.
    2. Dubois, Pierre & Vukina, Tomislav, 2009. "Incentives to Invest in Short-term vs. Long-term Contracts: Evidence from a Natural Experiment," TSE Working Papers 09-136, Toulouse School of Economics (TSE), revised Dec 2009.
    3. Key, Nigel, 2013. "Production Contracts and Farm Business Growth and Survival," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(02), May.
    4. Saenger, Christoph & Torero, Maximo & Qaim, Matin, 2013. "Impact of Third-Party Enforcement of Contracts in Agricultural Markets – A Field Experiment in Vietnam," Discussion Papers 143799, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    5. Hu, Y. & Hendrikse, G.W.J., 2007. "Allocation of Decision Rights in Fruit and Vegetable Contracts in China," ERIM Report Series Research in Management ERS-2007-077-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    6. MacDonald, James M. & Key, Nigel D., 2012. "Market Power in Poultry Production Contracting? Evidence from a Farm Survey," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 44(04), November.
    7. Hueth, Brent & Ligon, Ethan & Dimitri, Carolyn, 2007. "AJAE Appendix: Agricultural Contracts: Data and Research Needs," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 89(5), December.
    8. Key, Nigel D. & MacDonald, James M., 2008. "Local Monopsony Power in the Market for Broilers - Evidence from a Farm Survey," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6073, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Kostas Karantininis & Jesper T. Graversen, 2008. "Relational contracts and adaptation: application to a pork producer contract," Agribusiness, John Wiley & Sons, Ltd., vol. 24(3), pages 342-354.
    10. Hammond, Robert G. & Zheng, Xiaoyong, 2013. "Heterogeneity in tournaments with incomplete information: An experimental analysis," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 248-260.
    11. Torero, Maximo & Viceisza, Angelino, 2011. "Potential collusion and trust: Evidence from a field experiment in Vietnam," IFPRI discussion papers 1100, International Food Policy Research Institute (IFPRI).

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