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Do Quality Incentives Matter?

Author

Listed:
  • Alexander, Corinne E.
  • Goodhue, Rachael E.
  • Rausser, Gordon C.

Abstract

We utilize an unusual data set, involving fifteen tomato growers over four years, to analyze the impact of incentive contracts on behavior. Each grower delivers processing tomatoes under a price incentives contract and for a fixed price per ton. Our comparison of the quality of the tomatoes delivered under the two arrangements confirms that growers do respond to incentive contracts by improving tomato quality, as predicted by economic theory. The comparison is not confounded by the usual contract endogeneity and simultaneity problems, due to characteristics of the processing tomato industry and our data set.

Suggested Citation

  • Alexander, Corinne E. & Goodhue, Rachael E. & Rausser, Gordon C., 2000. "Do Quality Incentives Matter?," Working Papers 11946, University of California, Davis, Department of Agricultural and Resource Economics.
  • Handle: RePEc:ags:ucdavw:11946
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    File URL: http://purl.umn.edu/11946
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    References listed on IDEAS

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    1. Francine Lafontaine & Kathryn L. Shaw, 1999. "The Dynamics of Franchise Contracting: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 1041-1080, October.
    2. Kevin J. Murphy, 1986. "Incentives, Learning, and Compensation: A Theoretical and Empirical Investigation of Managerial Labor Contracts," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 59-76, Spring.
    3. Francine Lafontaine, 1992. "Agency Theory and Franchising: Some Empirical Results," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 263-283, Summer.
    4. Knoeber, Charles R & Thurman, Walter N, 1994. "Testing the Theory of Tournaments: An Empirical Analysis of Broiler Production," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 155-179, April.
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    Cited by:

    1. Hassan Fouayzi & Julie A. Caswell & Neal H. Hooker, 2006. "Motivations of Fresh-Cut Produce Firms to Implement Quality Management Systems," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(1), pages 132-146.
    2. Fernandez-Olmos, Marta & Rosell-Martinez, Jorge & Espitia-Escuer, Manuel Antonio, 2008. "Double Sided Moral Hazard and Share Contracts in agriculture," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43863, European Association of Agricultural Economists.
    3. Mussell, Al, 2003. "PRICE DISCOVERY MECHANISMS AND ALTERNATIVES FOR CANADIAN AGRICULTURE; Part II: A Review of Pricing Mechanisms from the Economic Literature," Miscellaneous Publications 18100, George Morris Center.
    4. Du, Xiaoxue & Lu, Liang & Zilberman, David, 2013. "The Economics of Contract Farming: A Credit and Investment Perspective," 2014 Allied Social Science Association (ASSA) Annual Meeting, January 3-5, 2014, Philadelphia, PA 161657, Agricultural and Applied Economics Association.
    5. Du, Xiaoxue & Lu, Liang & Reardon, Thomas & Zilberman, David, 2015. "The Economics of Agricultural Supply Chain Design: A Portfolio Selection Approach," 2016 Allied Social Science Association (ASSA) Annual Meeting, January 3-5, 2016, San Francisco, California 212809, Agricultural and Applied Economics Association.

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