An Attempt at Making the Principal-Agent Paradigm Operational

Robert A Androkovich

European Review of Agricultural Economics, 1989, vol. 16, issue 2, 285-300

Abstract: The authors adopt the principal-agent paradigm in explaining how the terms of the contract that exists between the growers and the processor of sugar beets in Southern Alberta are determined; adopt the methodology of computation general equilibirum analysis in calibrating the optimal-incentive contract to a benchmark solution; and then carry out a series of counterfactual experiments to demonstrate how the terms of the contract and input use will react to changes in exogenous factors and how the optimal-incentive contract will differ from its first-best alternative. They find that the parameters that characterize the risk of the situation are of particular importance in determining contractual characteristics. Copyright 1989 by Oxford University Press.

Date: 1989
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European Review of Agricultural Economics is currently edited by Timothy Richards, Salvatore Di Falco, Céline Nauges and Vincenzina Caputo

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