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Governance Issues in the Principal-Agent Framework: Producing Cellulosic Ethanol in Michigan

Author

Listed:
  • Pandey, Vivek
  • Shanoyan, Aleksan
  • Ross, Brent

Abstract

This article analyzes the incentives and compensation problems faced by cellulosic ethanol producer and logging firms and the consequent impact on the organization of the wood based cellulosic ethanol industry in the US. The success of this relationship is central to setting up the biofuel industry in Michigan and in the US at large. The theoretical results indicate that specification contract under the principal-agent framework is of limited utility due to’ metering’ problem when the principal contracts with multiple agents for the supply of feedstock.. Alternative arrangements including JVs have the potential to provide close to first best solutions.

Suggested Citation

  • Pandey, Vivek & Shanoyan, Aleksan & Ross, Brent, 2010. "Governance Issues in the Principal-Agent Framework: Producing Cellulosic Ethanol in Michigan," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61362, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:61362
    DOI: 10.22004/ag.econ.61362
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    References listed on IDEAS

    as
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    3. Oliver E. Williamson, 1991. "Strategizing, economizing, and economic organization," Strategic Management Journal, Wiley Blackwell, vol. 12(S2), pages 75-94, December.
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