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Risk and Transactions Cost in Contracting: Results from a Choice-Based Experiment

Author

Listed:
  • Hudson Darren

    (Mississippi State University)

  • Lusk Jayson

    (Purdue University)

Abstract

Contracting is a contentious issue in agriculture. Competing theories assert that risk or transactions cost drive contracting decisions, with some argument that autonomy also plays a role. We examine preferences for different contract attributes using a choice-based conjoint experiment. Results of a study of agricultural producers show that both risk and transactions cost play a role in contracting decisions. Autonomy also plays a role, especially to the extent that producers wish to avoid total loss of autonomy. These results suggest that the effects of risk and transactions cost are relative and should both be considered when analyzing contracting decisions.

Suggested Citation

  • Hudson Darren & Lusk Jayson, 2004. "Risk and Transactions Cost in Contracting: Results from a Choice-Based Experiment," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 2(1), pages 1-19, February.
    • Handle: RePEc:bpj:bjafio:v:2:y:2004:i:1:n:2
    DOI: 10.2202/1542-0485.1046
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    References listed on IDEAS

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