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Interactions Between Incentive Instruments: Contracts and Quality in Processing Tomatoes
Author Rachael E. Goodhue, Sandeep Mohapatra and Gordon C. Rausser
Year 2010
Contracting and other forms of vertical coordination are important parts of the supply chains for many agricultural products. Often the buyer cares about multiple product attributes affected by a grower’s actions. Using data that are insulated from common methodological problems, we test whether or not price incentives for two processing tomato quality attributes exhibit complementarity in improving delivered quality. Price incentives for the two attributes are substitutes for the provision of one and complements for the other. This finding has consequences for the profit-maximizing choice of incentive instruments for processors, and contributes to the literature regarding tests for complementarities.
Publisher American Journal of Agricultural Economics 92 (5): 1283-1293
Keywords agricultural contracts. complementarity. incentives. processing.