Quality Incentives in Informal Markets: The Case of Ecuadorian Cocoa
We investigate the economic importance of implicit quality incentives in an agricultural market that lacks the institutional capacity for measuring quality verifiably. We measure the magnitude of implicit price premiums for quality, and we distinguish empirically between hedonic-pricing and implicit-contracting motivations for observed incentives. We find price premiums comparable in magnitude to premiums observed in other agricultural markets where quality is measured verifiably. Premiums are highest for relatively low-value but highly-informative quality characteristics, and buyers who are informationally close to farmers implicitly reward actions that affect unobservable quality characteristics. We conclude that implicit contracting is used to provide quality incentives comparable in magnitude to what is provided through more explicit means in formally organized markets.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- McDonald, R. Allen & Schroeder, Ted C., 2000. "Determinants Of Profit Variability In Fed Cattle Grid Pricing," 2000 Annual Meeting, June 29-July 1, 2000, Vancouver, British Columbia 36514, Western Agricultural Economics Association.
- Bengt Holmstrom & Paul R. Milgrom, 1985.
"Aggregation and Linearity in the Provision of Intertemporal Incentives,"
Cowles Foundation Discussion Papers
742, Cowles Foundation for Research in Economics, Yale University.
- Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-28, March.
- Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-62, March.
- Marcel Fafchamps & Ruth Hill & Bart Minten, 2006.
"Quality Control in Non-Staple Food Markets: Evidence from India,"
Economics Series Working Papers
GPRG-WPS-057, University of Oxford, Department of Economics.
- Marcel Fafchamps & Ruth Vargas Hill & Bart Minten, 2008. "Quality control in nonstaple food markets: evidence from India," Agricultural Economics, International Association of Agricultural Economists, vol. 38(3), pages 251-266, 05.
- Fafchamps, Marcel & Vargas Hill, Ruth & Minten, Bart, 2007. "Quality control in non-staple food markets: Evidence from India," IFPRI discussion papers 717, International Food Policy Research Institute (IFPRI).
- Brent Hueth & Ethan Ligon, 2002.
"Estimation of an efficient tomato contract,"
European Review of Agricultural Economics,
Foundation for the European Review of Agricultural Economics, vol. 29(2), pages 237-253, June.
- Gibbons, Robert & Waldman, Michael, 1999. "Careers in organizations: Theory and evidence," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 36, pages 2373-2437 Elsevier.
- Ola Kvaløy, 2006. "Self-enforcing contracts in agriculture," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 33(1), pages 73-92, March.
- Bentley W. MacLeod, 2003.
"Optimal Contracting with Subjective Evaluation,"
American Economic Review,
American Economic Association, vol. 93(1), pages 216-240, March.
- Espinosa, Juan Andres & Goodwin, Barry K., 1991. "Hedonic Price Estimation For Kansas Wheat Characteristics," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(01), July.
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
- Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
- François Bourguignon & Martin Fournier & Marc Gurgand, 2007.
"Selection Bias Corrections Based On The Multinomial Logit Model: Monte Carlo Comparisons,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 21(1), pages 174-205, 02.
- François Bourguignon & Martin Fournier & Marc Gurgand, 2004. "Selection Bias Corrections Based on the Multinomial Logit Model: Monte-Carlo Comparisons," DELTA Working Papers 2004-20, DELTA (Ecole normale supérieure).
- Makoto Ohta & Zvi Griliches, 1976. "Automobile Prices Revisited: Extensions of the Hedonic Hypothesis," NBER Chapters, in: Household Production and Consumption, pages 325-398 National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:ags:aaea13:150378. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.