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Equilibrium Contracts in the Israeli Citrus Industry

Author

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  • Kachel, Yael
  • Kislev, Yoav
  • Finkelshtain, Israel

Abstract

The Israeli citrus industry, made of several thousands growers, is served by an oligopoly of several exporters. The export sector is highly concentrated; the market share of the 3 largest firms is above 95% and the HHI level is 2,620. Exporters offer growers contracts, generally on a ”take it or leave it” basis. Growers are supplying their fruit to exporters of their choice. In contrast to the typical result of textbook contract theory that predicts profit sharing, the most common contracts in the industry are of the consignment kind and they provide little price information. In this paper we develop a model to explain this phenomenon in terms of strategic behavior of exporters who offer consignment contracts in order to conceal price information and reduce price competition. This explanation is examined in an econometric study of the industry.

Suggested Citation

  • Kachel, Yael & Kislev, Yoav & Finkelshtain, Israel, 2003. "Equilibrium Contracts in the Israeli Citrus Industry," Discussion Papers 289992, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    • Handle: RePEc:ags:huaedp:289992
    DOI: 10.22004/ag.econ.289992
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    Cited by:

    1. Götz, Linde & von Cramon-Taubadel, Stephan & Kachel, Yael, 2014. "Vertical Price Transmission in the International Fresh Fruit and Vegetable Supply Chain: Israeli Grapefruit Exports to the EU after Export Liberalisation," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 53(2), pages 1-22, May.

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