What does an optimal agricultural contract look like? We show how to use production data to design incentive-compatible contracts, and apply the method to California's processing tomato industry.

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Abstract

This article shows how available production data can be used to construct the terms of an efficient contract. The approach is applied to the design of a contract for processing tomatoes, a commodity for which a variety of different contractual provisions are used in practice. The analysis yields estimates of the efficient level of incentive intensity, the efficient degree of risk sharing, and the welfare cost of using suboptimal contract terms.

BibTeX

@Article{	  ligon04,
  author	= {Ethan Ligon},
  title		= {Using Production Data to Design Efficient Contracts},
  journal	= {American Journal of Agricultural Economics},
  year		= 2004,
  volume	= 86,
  number	= 3,
  pages		= {848--853},
  doi		= {10.1111/j.0002-9092.2004.00636.x}
}