Impact of Third-Party Enforcement of Contracts in Agricultural Markets - A Field Experiment in Vietnam
AbstractWe study the effect of alleviating information asymmetry regarding product quality that is widespread in developing-country agricultural markets. Opportunistic buyers may underreport quality levels back to farmers to reduce the price they have to pay. In response, farmers may curb investment, negatively affecting farm productivity. In an experiment, we entitle randomly selected smallholder dairy farmers in Vietnam to independently verify milk testing results. Treatment farmers use 13 percent more inputs and also increase their output. We show that the buying company had initially not underreported product quality, which is why third-party monitoring led to a Pareto improvement in the supply chain.
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Bibliographic InfoPaper provided by Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development in its series Discussion Papers with number 143583.
Date of creation: Jan 2013
Date of revision:
Agribusiness; Industrial Organization; Institutional and Behavioral Economics; International Development; Livestock Production/Industries; C93; D86; L14; O13; Q12; Q13;
Other versions of this item:
- 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.
- Saenger, Christoph & Torero, Maximo & Qaim, Matin, 2012. "Impact of Third-Party Enforcement of Contracts in Agricultural Markets–A Field Experiment in Vietnam," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124628, Agricultural and Applied Economics Association.
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
This paper has been announced in the following NEP Reports:
- NEP-AGR-2013-03-02 (Agricultural Economics)
- NEP-ALL-2013-03-02 (All new papers)
- NEP-DEV-2013-03-02 (Development)
- NEP-EXP-2013-03-02 (Experimental Economics)
- NEP-SEA-2013-03-02 (South East Asia)
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