Time Series Analysis Of A Principal-Agent Model To Assess Risk Shifting And Bargaining Power In Commodity Marketing Channels
AbstractWe apply the classic agency model to investigate risk shifting in an agricultural marketing channel, using time series analysis. We show that if the principal is risk-neutral and the agent is risk-averse instead of risk-neutral, then a linear contract can still be optimal if the fixed payment is negative. Empirical results for the Dutch potato marketing channel indicate that while fixed payments to farmers (agents) have decreased over time, even to negative levels, the incentive intensity has approximately doubled, and the risk premium the farmers ask for has remained considerable. These results imply that risk has shifted from wholesalers, processors, and retailers to farmers; we argue that this shift could be the consequence of chain reversal, i.e., the transformation of the traditional supply chain into a demand-oriented chain.
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 InfoPaper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2003 Annual meeting, July 27-30, Montreal, Canada with number 22046.
Date of creation: 2003
Date of revision:
Contact details of provider:
Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
Marketing; Risk and Uncertainty;
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 & Philip Garcia, 2001. "Measuring Producers' Risk Preferences: A Global Risk-Attitude Construct," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 993-1009.
- W. Erno Kuiper & Matthew T.G. Meulenberg, 2002. "Vertical price leadership: A cointegration analysis," Agribusiness, John Wiley & Sons, Ltd., vol. 18(3), pages 317-331.
- Hausman, Jerry A, 1978.
"Specification Tests in Econometrics,"
Econometric Society, vol. 46(6), pages 1251-71, November.
- Holmstrom, Bengt & Milgrom, Paul, 1987.
"Aggregation and Linearity in the Provision of Intertemporal Incentives,"
Econometric Society, vol. 55(2), pages 303-28, March.
- Bengt Holmstrom & Paul R. Milgrom, 1985. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Cowles Foundation Discussion Papers 742, Cowles Foundation for Research in Economics, Yale University.
- Mathewson, G Frank & Winter, Ralph A, 1985. "The Economics of Franchise Contracts," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 503-26, October.
- Daniel A. Ackerberg & Maristella Botticini, 1999.
"Endogenous Matching and the Empirical Determinants of Contract Form,"
Boston University - Institute for Economic Development
92, Boston University, Institute for Economic Development.
- Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 564-591, June.
- Daniel A. Ackerberg & Maristella Botticini, 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Papers 0096, Boston University - Industry Studies Programme.
- Ackerberg, D.A. & Botticini, M., 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Papers 96, Boston University - Department of Economics.
- Boehlje, Michael, 1996. "Industrialization of Agriculture: What are the Implications?," Choices, Agricultural and Applied Economics Association, vol. 11(1).
- Stiglitz, Joseph E, 1974.
"Incentives and Risk Sharing in Sharecropping,"
Review of Economic Studies,
Wiley Blackwell, vol. 41(2), pages 219-55, April.
- Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
- Neira, Ivano & Quagrainie, Kwamena K., 2006. "Analysis of Risk Behavior in the U.S. Farm-raised Catfish Market," Marine Resource Economics, Marine Resources Foundation, vol. 21(4).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.