Competition and Custom in Economic Contracts: A Case Study of Illinois Agriculture

H. Young and Mary Burke

American Economic Review, 2001, vol. 91, issue 3, 559-573

Abstract: Survey data suggest that cropsharing contracts exhibit a much higher degree of uniformity than is warranted by economic fundamentals. We propose a dynamic model of contract choice to explain this phenomenon. Landowners and tenants recontract periodically, taking into account expected returns as well as conformity with local practice. The resulting stochastic dynamical system is studied using techniques from statistical mechanics. The most likely states consist of patches where contractual terms are nearly uniform, separated by boundaries where the terms shift abruptly. These and other predictions of the model are borne out by survey data on agricultural contracts in Illinois.

JEL-codes: J43 L14 Q15 Z13 (search for similar items in EconPapers)
Date: 2001
Note: DOI: 10.1257/aer.91.3.559
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Citations: View citations in EconPapers (104)

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