IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

The Quality-Quantity Trade-off in the Principal-Agent Framework

  • Olmos, Marta Fernandez
  • Martinez, Jorge Rosell
Registered author(s):

    This paper uses the principal-agent theory to analytically investigate the optimal incentive-based compensation contract that a processor should offer to a grower performing efforts in quantity and quality. In this process, we contribute to the substantive literature on multi-task principal-agent models by analyzing the quality-quantity trade-off and studying the implications of such a relationship in the principal-agent framework. One striking result of these effects is that, under appropriate incentive-based grower’s compensation, the processor may encourage grower’s effort in quality without crowding out grower’s effort in quantity.

    If 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.

    File URL: http://purl.umn.edu/118578
    Download Restriction: no

    Article provided by Greek Association of Agricultural Economists in its journal Agricultural Economics Review.

    Volume (Year): 11 (2010)
    Issue (Month): 1 (January)
    Pages:

    as
    in new window

    Handle: RePEc:ags:aergaa:118578
    Contact details of provider: Web page: http://www.etagro.gr/
    Email:


    More information through EDIRC

    References listed on IDEAS
    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.:

    as in new window
    1. George Baker & Robert Gibbons & Kevin J. Murphy, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1125-1156.
    2. Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 2000. "Multitask agency problems: Focus and task clustering," European Economic Review, Elsevier, vol. 44(4-6), pages 869-877, May.
    3. Newbery, D M G & Stiglitz, J E, 1979. "The Theory of Commodity Price Stabilisation Rules: Welfare Impacts and Supply Responses," Economic Journal, Royal Economic Society, vol. 89(356), pages 799-817, December.
    4. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
    5. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    6. Fehr, Ernst & Schmidt, Klaus M., 2004. "Fairness and Incentives in a Multi-Task Principal-Agent Model," Discussion Papers in Economics 335, University of Munich, Department of Economics.
    7. Bryan C McCannon, 2008. "The Quality–Quantity Trade-off," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 34(1), pages 95-100, Winter.
    8. W. Bentley MacLeod & James M. Malcomson, 1986. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Working Papers 585, Queen's University, Department of Economics.
    9. GABSZEWICZ, Jean J. & THISSE, Jacques-François, "undated". "Entry (and exit) in a differentiated industry," CORE Discussion Papers RP 400, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. Daniel A. Ackerberg & Maristella Botticini, 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Boston University - Institute for Economic Development 92, Boston University, Institute for Economic Development.
    11. R. J. Folwell & V. A. McCracken & J. R. Ellis & S. Spayd & J. Yarnell, 1990. "Pricing of raw agricultural products by quality attributes: Case study of Concord grapes," Agribusiness, John Wiley & Sons, Ltd., vol. 6(5), pages 475-488.
    12. Lanjouw, Jean Olson, 1999. "Information and the operation of markets: tests based on a general equilibrium model of land leasing in India," Journal of Development Economics, Elsevier, vol. 60(2), pages 497-527, December.
    13. Michel Robe, 2001. "What Can We Learn From Simulating a Standard Agency Model?," Computing in Economics and Finance 2001 98, Society for Computational Economics.
    14. Gaynor, M. & Gertler, P., 1996. "Moral hazard and Risk Speading in Partnerships," Papers 96-09, RAND - Reprint Series.
    15. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-328, March.
    16. Pierre Dubois & Tomislav Vukina, 2004. "Grower Risk Aversion and the Cost of Moral Hazard in Livestock Production Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 835-841.
    17. Rubin, Paul H, 1978. "The Theory of the Firm and the Structure of the Franchise Contract," Journal of Law and Economics, University of Chicago Press, vol. 21(1), pages 223-233, April.
    18. Huffman, Wallace & Just, Richard E., 2000. "Setting Efficient Incentives for Agricultural Research: Lessons from Principal-Agent Theory," Staff General Research Papers Archive 5040, Iowa State University, Department of Economics.
    19. Ghatak, Maitreesh & Pandey, Priyanka, 2000. "Contract choice in agriculture with joint moral hazard in effort and risk," Journal of Development Economics, Elsevier, vol. 63(2), pages 303-326, December.
    20. Laffont, Jean-Jacques & Tirole, Jean, 1990. "The Politics of Government Decision Making: Regulatory Institutions," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(1), pages 1-31, Spring.
    21. Francine Lafontaine, 1992. "Agency Theory and Franchising: Some Empirical Results," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 263-283, Summer.
    22. Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-1483, September.
    23. Michael L. Lemmon & James S. Schallheim & Jaime F. Zender, 2000. "Do Incentives Matter? Managerial Contracts for Dual-Purpose Funds," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 273-299, April.
    24. Fraser, Iain, 2003. "The Role of Contracts in Wine Grape Supply Coordination: An Overview," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 11, pages -.
    25. Steven Shavell, 1979. "Risk Sharing and Incentives in the Principal and Agent Relationship," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 55-73, Spring.
    26. Francine Lafontaine & Margaret E. Slade, 1998. "Incentive Contracting and the Franchise Decision," NBER Working Papers 6544, National Bureau of Economic Research, Inc.
    27. Allen, Douglas W & Lueck, Dean, 1999. "The Role of Risk in Contract Choice," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 704-36, October.
    28. Otsuka, Keijiro & Chuma, Hiroyuki & Hayami, Yujiro, 1992. "Land and Labor Contracts in Agrarian Economies: Theories and Facts," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 1965-2018, December.
    29. Beard, T. Randolph & Thompson, Henry, 2003. "Duopoly quotas and relative import quality," International Review of Economics & Finance, Elsevier, vol. 12(2), pages 275-281.
    30. Robert P. King & Gé B. C. Backus & Monique A. van der Gaag, 2007. "Incentive systems for food quality control with repeated deliveries: Salmonella control in pork production," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 34(1), pages 81-104, March.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ags:aergaa:118578. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.