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The yield/quality trade-off and contractual choice

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  • Olmos, Marta Fernandez
  • Rosell-Martinez, Jorge
  • Espitia-Escuer, Manuel Antonio

Abstract

This paper provides an analysis of the choice of governance mechanism in agriculture using an integrated perspective based on agency theory. The main ways of organizing agriculture are compared: spot market and incentive contract. With the analytical development of both models, it is explored that the choice of the optimal mechanism depends on initial conditions such as uncertainty, the risk aversion of the agents or the number of competitors. Moreover, according to the predictions made by the economic literature on agrarian organization, the results support the coexistence of both governance alternatives.

Suggested Citation

  • Olmos, Marta Fernandez & Rosell-Martinez, Jorge & Espitia-Escuer, Manuel Antonio, 2008. "The yield/quality trade-off and contractual choice," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6065, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea08:6065
    DOI: 10.22004/ag.econ.6065
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