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An Attempt at Making the Principal-Agent Paradigm Operational

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  • Androkovich, Robert A

Abstract

The authors adopt the principal-agent paradigm in explaining how the terms of the contract that exists between the growers and the processor of sugar beets in Southern Alberta are determined; adopt the methodology of computation general equilibirum analysis in calibrating the optimal-incentive contract to a benchmark solution; and then carry out a series of counterfactual experiments to demonstrate how the terms of the contract and input use will react to changes in exogenous factors and how the optimal-incentive contract will differ from its first-best alternative. They find that the parameters that characterize the risk of the situation are of particular importance in determining contractual characteristics. Copyright 1989 by Oxford University Press.

Suggested Citation

  • Androkovich, Robert A, 1989. "An Attempt at Making the Principal-Agent Paradigm Operational," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 16(2), pages 285-300.
    • Handle: RePEc:oup:erevae:v:16:y:1989:i:2:p:285-300
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    Cited by:

    1. Key, Nigel & Runsten, David, 1999. "Contract Farming, Smallholders, and Rural Development in Latin America: The Organization of Agroprocessing Firms and the Scale of Outgrower Production," World Development, Elsevier, vol. 27(2), pages 381-401, February.
    2. Devadoss Stephen & Cooper Kevin, 2000. "Simultaneous Price And Quantity Determination In A Joint Profit Maximizing Bilateral Monopoly Under Dynamic Optimization," International Economic Journal, Taylor & Francis Journals, vol. 14(1), pages 71-84.
    3. Ahn, Kyeong Ah & Choi, Young Chan, 2016. "Role of farmer’s attitude to risk in the relationship between trust and contract decisions: The fresh apple market in South Korea," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235762, Agricultural and Applied Economics Association.

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