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Quality Measurement And Risk-Sharing In Contracts For California Fruits And Vegetables

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  • Hueth, Brent
  • Ligon, Ethan

Abstract

We hypothesize that imperfect quality measurement in contracts for fresh fruits and vegetables results in a moral-hazard problem, and that the final price of the produce provides additional information regarding quality. As a consequence, growers are not shielded from all price risk. This hypothesis is tested informally with observations on actual contracts in California.

Suggested Citation

  • Hueth, Brent & Ligon, Ethan, 1998. "Quality Measurement And Risk-Sharing In Contracts For California Fruits And Vegetables," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20957, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea98:20957
    DOI: 10.22004/ag.econ.20957
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    References listed on IDEAS

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    1. Richard E. Just, 1974. "An Investigation of the Importance of Risk in Farmers' Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(1), pages 14-25.
    2. Catherine A. Durham & Richard J. Sexton, 1992. "Oligopsony Potential in Agriculture: Residual Supply Estimation in California's Processing Tomato Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(4), pages 962-972.
    3. Jewitt, Ian, 1988. "Justifying the First-Order Approach to Principal-Agent Problems," Econometrica, Econometric Society, vol. 56(5), pages 1177-1190, September.
    4. Brent Hueth & Ethan Ligon, 1999. "Producer Price Risk and Quality Measurement," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 512-524.
    5. Prescott, Edward C & Townsend, Robert M, 1984. "Pareto Optima and Competitive Equilibria with Adverse Selection and Moral Hazard," Econometrica, Econometric Society, vol. 52(1), pages 21-45, January.
    6. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
    7. Richard E. Just & David Zilberman, 1985. "Risk Aversion, Technology Choice, and Equity Effects of Agricultural Policy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(2), pages 435-440.
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    Cited by:

    1. Vassalos, Michael & Hu, Wuyang & Woods, Timothy A. & Schieffer, Jack & Dillon, Carl R., 2013. "Fresh Vegetable Growers' Risk Perception, Risk Preference and Choice of Marketing Contracts: A Choice Experiment," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 142506, Southern Agricultural Economics Association.
    2. Peter Goldsmith & Rishi Basak, 2001. "Incentive Contracts and Environmental Performance Indicators," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 20(4), pages 259-279, December.
    3. Hudson, Darren, 2000. "Contracting In Agriculture: A Primer For Farm Lenders," Research Reports 15789, Mississippi State University, Department of Agricultural Economics.
    4. Goldsmith, Peter D. & Basak, Rishi, 1999. "Environmental Performance Indicators And Executive-Employee Risk Sharing," 1999 Annual meeting, August 8-11, Nashville, TN 21546, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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