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Producer preferences towards vertical coordination: The case of Canadian beef alliances

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  • Steiner, Bodo E.
  • Lan, Kevin
  • Unterschultz, James R.
  • Boxall, Peter C.
  • Laate, Emmanuel
  • Yang, Danyi

Abstract

A survey among cow-calf producers was conducted during 2006 in Western Canada, to assess producers’ preferences towards participation in beef alliances. Producers’ choices were analyzed by varying the degree of vertical coordination in hypothetical lliance participation, while controlling for producer and farm-specific characteristics to explore risk, transaction cost and incentive considerations in participation decisions. Estimates from the attribute-based choice experiments suggest that information sharing regarding animal performance, revenue-risk and residual claimancy are important factors for producers driving alliance choices. Overall, cowcalf producers are willing to move toward higher levels of vertical coordination based on individual animal performance. However, the estimates also suggest that producers consider the benefits from being able to access animal-specific yield and grade data to be smaller than the costs of bearing potentially greater revenue risk as a result of moving towards grid-based pricing, and the transaction costs associated with relationship-building in alliances.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 123rd Seminar, February 23-24, 2012, Dublin, Ireland with number 122441.

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Date of creation: 24 Feb 2012
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Handle: RePEc:ags:eaa123:122441

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Keywords: beef value chain; vertical coordination; Canada; Risk and Uncertainty; Q12; Q13; C83; D22.;

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  1. Jeffrey H. Dorfman, 1996. "Modeling Multiple Adoption Decisions in a Joint Framework," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 547-557.
  2. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  3. Dinar, Ariel & Yaron, Dan, 1990. "Influence Of Quality And Scarcity Of Inputs On The Adoption Of Modern Irrigation Technologies," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 15(02), December.
  4. Ardian Harri & John Michael Riley & John D. Anderson & Keith H. Coble, 2009. "Managing economic risk in value-based marketing of fed cattle," Agricultural Economics, International Association of Agricultural Economists, vol. 40(3), pages 295-306, 05.
  5. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  6. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
  7. Bodo E. Steiner, 2007. "Negotiated transfer pricing: Theory and implications for value chains in agribusiness," Agribusiness, John Wiley & Sons, Ltd., vol. 23(2), pages 279-292.
  8. Unterschultz, James R. & Gurung, Rajendra Kumar, 2002. "New Generation Co-Operatives (Ngc) As A Model For Value-Added Agricultural Processing In Alberta: Applications To Factors Affecting Choice Of Pricing And Payment Practices By Traditional Marketing And," Project Report Series 24045, University of Alberta, Department of Resource Economics and Environmental Sociology.
  9. Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-98, January.
  10. Bodo Steiner, 2012. "Contracting in the wine supply chain with bilateral moral hazard, residual claimancy and multi-tasking," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 39(3), pages 369-395, July.
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