The Quality-Quantity Trade-off in the Principal-Agent Framework

Marta Fernandez Olmos and Jorge Rosell Martinez

Agricultural Economics Review, 2011, vol. 11, issue 01, 12

Abstract: This paper uses the principal-agent theory to analytically investigate the optimal incentive-based compensation contract that a processor should offer to a grower performing efforts in quantity and quality. In this process, we contribute to the substantive literature on multi-task principal-agent models by analyzing the quality-quantity trade-off and studying the implications of such a relationship in the principal-agent framework. One striking result of these effects is that, under appropriate incentive-based grower’s compensation, the processor may encourage grower’s effort in quality without crowding out grower’s effort in quantity.

Keywords: Agribusiness; Agricultural and Food Policy (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aergaa:118578

DOI: 10.22004/ag.econ.118578

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