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Impact of Third-Party Enforcement of Contracts in Agricultural Markets - A Field Experiment in Vietnam

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  • Saenger, Christoph
  • Torero, Maximo
  • Qaim, Matin

Abstract

We study the effect of alleviating information asymmetry regarding product quality that is widespread in developing-country agricultural markets. Opportunistic buyers may underreport quality levels back to farmers to reduce the price they have to pay. In response, farmers may curb investment, negatively affecting farm productivity. In an experiment, we entitle randomly selected smallholder dairy farmers in Vietnam to independently verify milk testing results. Treatment farmers use 13 percent more inputs and also increase their output. We show that the buying company had initially not underreported product quality, which is why third-party monitoring led to a Pareto improvement in the supply chain.

Suggested Citation

  • Saenger, Christoph & Torero, Maximo & Qaim, Matin, 2013. "Impact of Third-Party Enforcement of Contracts in Agricultural Markets - A Field Experiment in Vietnam," GlobalFood Discussion Papers 143583, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
  • Handle: RePEc:ags:gagfdp:143583
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    Cited by:

    1. Torero, Maximo & Viceisza, Angelino C.G., 2016. "Potential collusion and trust: Evidence from a field experiment in Vietnam," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 11(1), pages 1-11.
    2. Jo Swinnen & Rob Kuijpers, 2016. " Value chain innovations for technology transfer in developing and emerging economies: concept, typology and policy implications," Working Papers Department of Economics 539178, KU Leuven, Faculty of Economics and Business, Department of Economics.
    3. Qaim, Matin & Andersson, Camilla I.M. & Chege, Christine G.K. & Kimenju, Simon Chege & Klasen, Stephan & Rischke, Ramona, 2014. "Nutrition Effects of the Supermarket Revolution on Urban Consumers and Smallholder Farmers in Kenya," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 177204, Agricultural and Applied Economics Association.
    4. repec:tpr:restat:v:100:y:2018:i:1:p:1-13 is not listed on IDEAS
    5. Sandip Mitra & Dilip Mookherjee & Maximo Torero & Sujata Visaria, 2018. "Asymmetric Information and Middleman Margins: An Experiment with Indian Potato Farmers," The Review of Economics and Statistics, MIT Press, vol. 100(1), pages 1-13, March.
    6. Nicholas Minot & Loraine Ronchi, 2014. "Contract Farming," World Bank Other Operational Studies 24249, The World Bank.
    7. Bernard, Tanguy & Hidrobo, Melissa & Le Port, Agnès & Rawat, Rahul, 2017. "Nutrition incentives in dairy contract farming in northern Senegal," IFPRI discussion papers 1629, International Food Policy Research Institute (IFPRI).
    8. Romero, Cristina & Wollni, Meike, 2015. "Supplier dynamics in horticultural export chains – Evidence from Ecuador. Revised version," GlobalFood Discussion Papers 209961, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.

    More about this item

    Keywords

    Agribusiness; Industrial Organization; Institutional and Behavioral Economics; International Development; Livestock Production/Industries;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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