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

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  • Olmos, Marta Fernandez
  • Martinez, Jorge Rosell

Abstract

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.

Suggested Citation

  • Olmos, Marta Fernandez & Martinez, Jorge Rosell, 2011. "The Quality-Quantity Trade-off in the Principal-Agent Framework," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 11(1), pages 1-12, January.
    • Handle: RePEc:ags:aergaa:118578
    DOI: 10.22004/ag.econ.118578
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    Cited by:

    1. Kristian Strmenik & Friederike Wall & Christian Mitsch & Gernot Mödritscher, 2021. "Volume allocation in multi-sourcing: effects of the quantity–quality trade-off," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 29(2), pages 753-771, June.

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