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Contracts and Quality in the California Winegrape Industry

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  • Rachael Goodhue

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  • Dale Heien
  • Hyunok Lee
  • Daniel Sumner

Abstract

We analyze the relationship between product quality and contractingchoices using the results of a survey of California winegrape growers.Growers who produce high-quality grapes are more likely to use formalwritten contracts than are growers who produce low-quality grapes.Written contracts for high-quality grapes are more likely to includeprovisions regarding the production process, while written contractsfor low-quality grapes are more likely to include explicit financialincentives for sugar content and other product attributes. Copyright Kluwer Academic Publishers 2003

Suggested Citation

  • Rachael Goodhue & Dale Heien & Hyunok Lee & Daniel Sumner, 2003. "Contracts and Quality in the California Winegrape Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(3), pages 267-282, December.
  • Handle: RePEc:kap:revind:v:23:y:2003:i:3:p:267-282 DOI: 10.1023/B:REIO.0000031371.03322.9e
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    Cited by:

    1. Traversac, Jean-Baptiste & Rousset, Sylvain & Perrier-Cornet, Philippe, 2011. "Farm resources, transaction costs and forward integration in agriculture: Evidence from French wine producers," Food Policy, Elsevier, vol. 36(6), pages 839-847.
    2. Fares, M'hand & Orozco, Luis, 2014. "Tournament Mechanism in Wine-Grape Contracts: Evidence from a French Wine Cooperative," Journal of Wine Economics, Cambridge University Press, vol. 9(03), pages 320-345, December.
    3. Fernandez-Olmos, Marta & Rosell-Martinez, Jorge & Espitia-Escuer, Manuel Antonio, 2008. "Quality and governance mode choice: a transaction cost approach to the wine industry," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44266, European Association of Agricultural Economists.
    4. Christian Hirschhausen & Anne Neumann, 2008. "Long-Term Contracts and Asset Specificity Revisited: An Empirical Analysis of Producer–Importer Relations in the Natural Gas Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(2), pages 131-143, March.
    5. MacDonald, James M. & Korb, Penelope J., 2011. "Agricultural Contracting Update: Contracts in 2008," Economic Information Bulletin 101279, United States Department of Agriculture, Economic Research Service.
    6. Steiner, Bodo E., 2009. "The Extent and Nature of Contracting in the Wine Supply-Chain When Moral Hazard is Present," Staff Paper Series 154127, University of Alberta, Department of Resource Economics and Environmental Sociology.
    7. Fraser, Iain, 2005. "Microeconometric analysis of wine grape supply contracts in Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(1), March.
    8. Anderson, Kym, 2013. "Is Georgia the Next “New” Wine-Exporting Country?," Journal of Wine Economics, Cambridge University Press, vol. 8(01), pages 1-28, May.
    9. Franken, Jason R. V. & Bacon, Kevin J., 2014. "Organizational Structure and Operation of the Illinois Wine Industry," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 43(1), April.
    10. Brodt, Sonja & Klonsky, Karen & Thrupp, L. Ann, 2009. "Market Potential for Organic Crops in California: Almonds, Hay, and Winegrapes," Information Series 251906, University of California, Davis, Giannini Foundation.
    11. Miranda, Bruno & Chaddad, Fabio, 2016. "Transaction Costs, Capabilities, and Grape Procurement Strategies in U.S. Emerging Wine Regions," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235363, Agricultural and Applied Economics Association.
    12. Fabrizio Cafaggi & Paola Iamiceli, 2010. "Inter-firm Networks in the European Wine Industry," EUI-LAW Working Papers 19, European University Institute (EUI), Department of Law.
    13. Christopher Snyder, 2003. "Introduction to the 2003 International Industrial Organization Conference Special Issue," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(3), pages 175-177, December.
    14. Rachael Goodhue & Leo Simon, 2016. "Agricultural contracts, adverse selection, and multiple inputs," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 4(1), pages 1-33, December.
    15. Fernández Olmos, Marta, 2010. "The performance implications of "grow or buy" decisions in the wine industry," Food Policy, Elsevier, vol. 35(3), pages 256-264, June.
    16. Marta Fernández-Olmos & Jorge Rosell-Martínez & Manuel A. Espitia-Escuer, 2009. "Vertical integration in the wine industry: a transaction costs analysis on the Rioja DOCa," Agribusiness, John Wiley & Sons, Ltd., vol. 25(2), pages 231-250.
    17. Ewert, Joachim & Hanf, Jon H. & Schweichert, Erik, 2014. "Adaptation of South African Wine Cooperatives to Challenging Business Environments," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 42(2).
    18. 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).

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    Keywords

    Contract choice; contract design; quality; wine;

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