Relative performance schemes such as tournaments are commonly used in markets for a variety of livestock and processing commodities, while explicit versions of these schemes are rarely used in markets for fresh fruits and vegetables and specialty grains. We show how contracts for these latter commodities do in fact provide relative performance incentives, albeit indirectly, via a payment mechanism that depends on market prices. In such contracts, compensation is often an increasing function of revenue; this implements a relative performance scheme by making each grower's payment an increasing function of his own output but a decreasing function of other's output.
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
5036.
Length: Date of creation: 01 Mar 2002 Date of revision: Publication status: Published in American Journal of Agricultural Economics, May 2001, Vol. 83, No. 2, pp. 318-320. Handle: RePEc:isu:genres:5036
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