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Allocation of Authority in Agricultural Production Contracts

Author

Listed:
  • Cakir, Metin
  • Balagtas, Joseph Valdes
  • Wu, Steven Y.

Abstract

The objective of this paper is to develop a model that explains the involvement of first level handlers in farm level decisions. In particular, the research attempts to explain observed differences among levels of farmer's autonomy in production contracts of different agricultural commodities. We show that the trade off that a contractor faces for holding the decision rights for controlling production inputs varies for different production environments. In particular, the contractor prefers controlling inputs in production of commodities that have relatively uniform production environments, whereas it is more efficient to delegate the control to the producer for commodities that have diverse production environments.

Suggested Citation

  • Cakir, Metin & Balagtas, Joseph Valdes & Wu, Steven Y., 2009. "Allocation of Authority in Agricultural Production Contracts," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49577, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea09:49577
    DOI: 10.22004/ag.econ.49577
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    References listed on IDEAS

    as
    1. Rachael E. Goodhue, 2000. "Broiler Production Contracts as a Multi-Agent Problem: Common Risk, Incentives and Heterogeneity," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(3), pages 606-622.
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    3. Scott Johnson, C. & Foster, Kenneth A., 1994. "Risk Preferences and Contracting In the U.S. Hog Industry," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(2), pages 393-405, December.
    4. Gillespie, Jeffrey M. & Eidman, Vernon R., 1998. "The Effect of Risk and Autonomy on Independent Hog Producers' Contracting Decisions," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 30(1), pages 175-188, July.
    5. Brent Hueth & Ethan Ligon & Carolyn Dimitri, 2007. "Agricultural Contracts: Data and Research Needs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(5), pages 1276-1281.
    6. Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
    7. Lawrence, John D. & Kliebenstein, James, 1995. "Contracting and Vertical Coordination in the United States Pork Industry," Staff General Research Papers Archive 5050, Iowa State University, Department of Economics.
    8. Kliebenstein, James & Lawrence, John D., 1995. "Contracting and Vertical Coordination in the United States Pork Industry," ISU General Staff Papers 199501010800001264, Iowa State University, Department of Economics.
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