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The yield/quality trade-off and contractual choice

  • Olmos, Marta Fernandez
  • Rosell-Martinez, Jorge
  • Espitia-Escuer, Manuel Antonio

This paper provides an analysis of the choice of governance mechanism in agriculture using an integrated perspective based on agency theory. The main ways of organizing agriculture are compared: spot market and incentive contract. With the analytical development of both models, it is explored that the choice of the optimal mechanism depends on initial conditions such as uncertainty, the risk aversion of the agents or the number of competitors. Moreover, according to the predictions made by the economic literature on agrarian organization, the results support the coexistence of both governance alternatives.

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File URL: http://purl.umn.edu/6065
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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida with number 6065.

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Date of creation: 2008
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Handle: RePEc:ags:aaea08:6065
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