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Processor Placements and Producer Incentives: Analyzing Broiler Chicken Production Contracts

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  • Goodhue, Rachael
  • Rausser, Gordon
  • Simon, Leo

Abstract

Recent theoretical work on agricultural contracts has utilized agency theory. Most of this work considers a moral hazard problem, and assumes that producers are homogeneous, so that there is no adverse selection problem. We utilize a sample of producer performance under a broiler production contract to confirm that heterogeneity exists. We model the principal's decision process and test predictions regarding how heterogeneity will affect the principal's decisions. We attempt to differentiate between symmetric and asymmetric information cases. We find some support for our hypotheses, including evidence that adverse selection may affect the processor's decisions.
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Suggested Citation

  • Goodhue, Rachael & Rausser, Gordon & Simon, Leo, 2000. "Processor Placements and Producer Incentives: Analyzing Broiler Chicken Production Contracts," CUDARE Working Papers 198671, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:198671
    DOI: 10.22004/ag.econ.198671
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