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Do Incentives For Quality Matter?

Author

Listed:
  • Alexander, Corinne E.
  • Goodhue, Rachael E.
  • Rausser, Gordon C.

Abstract

We use an unusual dataset involving 14 tomato growers over 4 years to analyze the effect of incentive contracts on behavior in a fixed effects econometric model. We find that growers respond to incentive contracts by improving tomato quality, as predicted by economic theory. The comparison is not confounded by the usual contract endogeneity and simultaneity problems because of characteristics of the processing tomato industry and our dataset. We discuss the implications of our findings for the design of agricultural contracts.
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Suggested Citation

  • Alexander, Corinne E. & Goodhue, Rachael E. & Rausser, Gordon C., 2007. "Do Incentives For Quality Matter?," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 39(1), pages 1-16, April.
    • Handle: RePEc:ags:joaaec:6702
    DOI: 10.22004/ag.econ.6702
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    Cited by:

    1. Chanho Song & Sungha Jang & Jennifer Wiggins & Edward Nowlin, 2019. "Does haste always make waste? Service quantity, service quality, and incentives in speed-intensive service firms," Service Business, Springer;Pan-Pacific Business Association, vol. 13(2), pages 289-304, June.
    2. Christoph Saenger & Matin Qaim & Maximo Torero & Angelino Viceisza, 2013. "Contract farming and smallholder incentives to produce high quality: experimental evidence from the Vietnamese dairy sector," Agricultural Economics, International Association of Agricultural Economists, vol. 44(3), pages 297-308, May.
    3. Mahdi, Shireen, 2012. "Quality contingent contracts : evidence from Tanzania's coffee market," Policy Research Working Paper Series 6171, The World Bank.
    4. Adu-Gyamfi Poku & Regina Birner & Saurabh Gupta, 2018. "Making Contract Farming Arrangements Work in Africa’s Bioeconomy: Evidence from Cassava Outgrower Schemes in Ghana," Sustainability, MDPI, vol. 10(5), pages 1-21, May.
    5. Zuomiao Xie & Shiqi Yuan & Jinjing Zhu & Weiming Li, 2023. "Contract farming led by a seed enterprise and incentives to produce high quality: Which contract design performs best?," Agribusiness, John Wiley & Sons, Ltd., vol. 39(4), pages 1173-1198, October.
    6. Olmos, Marta Fernandez & Rosell-Martinez, Jorge & Espitia-Escuer, Manuel Antonio, 2008. "On the co-existence of spot and contract markets: an analysis of quality," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6082, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Olmos, Marta Fernandez & Rosell-Martinez, Jorge & Espitia-Escuer, Manuel Antonio, 2008. "The yield/quality trade-off and contractual choice," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6065, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Pyddoke, Roger, 2020. "Penalties as incentives for punctuality and regularity in tendered Swedish public transport," Research in Transportation Economics, Elsevier, vol. 83(C).

    More about this item

    Keywords

    Marketing;

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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