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Why Did Contracts Supplant the Cash Market in the Broiler Industry? An Economic Analysis Featuring Technological Innovation and Institutional Response

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Listed:
  • Dimitri Carolyn

    (Economic Research Service, USDA)

  • Jaenicke Edward C.

    (Pennsylvania State University)

  • Effland Anne B

    (Economic Research Service, USDA)

Abstract

The decision to write contracts for production of commodities can be framed as an institutional response to changing industry and market conditions. When innovations increase available rents to technology owners (or technology appropriators), contracts can replace cash market transactions even though contracts carry higher transaction costs. We proceed by first fully documenting technological innovation in the broiler industry and tracing the evolution of contracts in the broiler industry. Next, we adopt a stylistic model to demonstrate how technological innovation might induce a switch to contract sales from cash market transactions. This paper contributes to the literature by investigating major institutional change in the broiler industry through an integrated analysis that weaves together industry history with elements of institutional economics, transaction cost theory, and game-theoretic economic analysis.

Suggested Citation

  • Dimitri Carolyn & Jaenicke Edward C. & Effland Anne B, 2009. "Why Did Contracts Supplant the Cash Market in the Broiler Industry? An Economic Analysis Featuring Technological Innovation and Institutional Response," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 7(1), pages 1-36, October.
  • Handle: RePEc:bpj:bjafio:v:7:y:2009:i:1:n:9
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    References listed on IDEAS

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    1. Xiaodong Du & David A. Hennessy & William M. Edwards, 2007. "Determinants of Iowa Cropland Cash Rental Rates: Testing Ricardian Rent Theory," Center for Agricultural and Rural Development (CARD) Publications 07-wp454, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Sergio H. Lence & Ashok K. Mishra, 2003. "The Impacts of Different Farm Programs on Cash Rents," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 753-761.
    3. Yoder, Jonathan & Hossain, Ishrat & Epplin, Francis & Doye, Damona, 2008. "Contract duration and the division of labor in agricultural land leases," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 714-733, March.
    4. Lyubov A. Kurkalova & Christopher Burkart & Silvia Secchi, 2004. "Cropland Cash Rental Rates in the Upper Mississippi River Basin," Center for Agricultural and Rural Development (CARD) Publications 04-tr47, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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