Marketing Agreement, Food Safety and Contract Design
AbstractRecent outbreaks of food-borne illness related to fruit and vegetables have led to increased concerns about the safety of produce. In response, the industry has adopted marketing agreements to ensure consistency of product safety. Contracts now are widely used between processors and growers to specify product safety attributes. This paper uses a principal-agent model to examine how the inclusion of a marketing agreement influences the behavior of growers and processors under processor-grower contracts. We conclude that: (1) the processor offers a contract with a higher premium and a lower base payment under the contract with a marketing agreement (2) contract parameters change in similar manner under the two contracts (3) under a contract with a marketing agreement the processor earns less profit. The individual contract scenarios are discussed in detail.
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 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida with number 6434.
Date of creation: 2008
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
contract; food safety; principal-agent; market agreements; GAPs; on-farm inspection; Food Consumption/Nutrition/Food Safety; Marketing;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2008-11-18 (Agricultural Economics)
- NEP-ALL-2008-11-18 (All new papers)
- NEP-CTA-2008-11-18 (Contract Theory & Applications)
- NEP-MKT-2008-11-18 (Marketing)
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.:
- Hennessy, David A. & Roosen, Jutta & Jensen, Helen H., 2003.
"Systemic Failure in the Provision of Safe Food,"
Staff General Research Papers
2091, Iowa State University, Department of Economics.
- David A. Hennessy & Jutta Roosen & Helen H. Jensen, 2002. "Systemic Failure in the Provision of Safe Food," Center for Agricultural and Rural Development (CARD) Publications 02-wp299, Center for Agricultural and Rural Development (CARD) at Iowa State University.
- Caswell, Julie A. & Mojduszka, Eliza M., 1996.
"Using Informational Labeling To Influence The Market For Quality In Food Products,"
25989, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
- Julie A. Caswell & Eliza M. Mojduszka, 1996. "Using Informational Labeling to Influence the Market for Quality in Food Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(5), pages 1248-1253.
- Roger G. Ginder & Brent Hueth & Philippe Marcoul, 2005. "Cooperatives and Contracting in Agriculture: The Case of West Liberty Foods," Center for Agricultural and Rural Development (CARD) Publications 05-wp408, Center for Agricultural and Rural Development (CARD) at Iowa State University.
- Fraser, Rob W., 2003.
"On the use of targeting to reduce moral hazard in agri-environmental schemes,"
2003 Conference (47th), February 12-14, 2003, Fremantle, Australia
57867, Australian Agricultural and Resource Economics Society.
- Rob Fraser, 2004. "On the Use of Targeting to Reduce Moral Hazard in Agri-environmental Schemes," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(3), pages 525-540.
- Ligon, Ethan, 2002.
"Estimation of an Efficient Tomato Contract,"
Staff General Research Papers
10235, Iowa State University, Department of Economics.
- De, Sankar & Nabar, Prafulla, 1991. "Economic implications of imperfect quality certification," Economics Letters, Elsevier, vol. 37(4), pages 333-337, December.
- MacDonald, James M. & Perry, Janet E. & Ahearn, Mary Clare & Banker, David E. & Chambers, William & Dimitri, Carolyn & Key, Nigel D. & Nelson, Kenneth E. & Southard, Leland W., 2004. "Contracts, Markets, and Prices: Organizing the Production and Use of Agricultural Commodities," Agricultural Economics Reports 34013, United States Department of Agriculture, Economic Research Service.
- Starbird, S. Andrew, 2005. "Supply Chain Contracts and Food Safety," Choices, Agricultural and Applied Economics Association, vol. 20(2).
- Brent Hueth & Tigran Melkonyan, 2004. "Identity Preservation, Multitasking, and Agricultural Contract Design," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 842-847.
- Rachael E. Goodhue, 2000. "Broiler Production Contracts as a Multi-Agent Problem: Common Risk, Incentives and Heterogeneity," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(3), pages 606-622.
- Crespi, John M. & Marette, Stephan, 2003. "Some Economic Implications Of Public Labeling," Journal of Food Distribution Research, Food Distribution Research Society, vol. 34(03), November.
- Hirschauer, Norbert & Musshoff, Oliver, 2007. "A game-theoretic approach to behavioral food risks: The case of grain producers," Food Policy, Elsevier, vol. 32(2), pages 246-265, April.
- Rob Fraser, 2002.
"Moral Hazard and Risk Management in Agri-environmental Policy,"
Journal of Agricultural Economics,
Wiley Blackwell, vol. 53(3), pages 475-487.
- Fraser, Rob W., 2002. "Moral Hazard and Risk Management in Agri-Environmental Policy," 2002 Conference (46th), February 13-15, 2002, Canberra 125086, Australian Agricultural and Resource Economics Society.
- S. Andrew Starbird, 2005. "Moral Hazard, Inspection Policy, and Food Safety," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(1), pages 15-27.
- Yanguo Wang & Edward C. Jaenicke, 2006. "Simulating the Impacts of Contract Supplies in a Spot Market-Contract Market Equilibrium Setting," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(4), pages 1062-1077.
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.