The role of product differentiation for contract choice in the agro-food sector

Jongick Jang and Frayne Olson

European Review of Agricultural Economics, 2010, vol. 37, issue 2, 251-273

Abstract: This research examines the recent growth of contract use in the USA and European agro-food sector where asset specificity is not a dominant concern and secondary markets exist. It sheds light on the neglected capabilities of a contract to transmit buyer-specific information, obtain secondary information and price uncertain costs of buyer-specific product attributes when compared with alternative spot markets. It proposes that the value of a contract's capabilities increases with a processor's or retailer's demand for buyer-specific input attributes which require unique production practices and cannot be realised by after-harvest sorting. The implications for policy and contract design are also discussed. Oxford University Press and Foundation for the European Review of Agricultural Economics 2010; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org, Oxford University Press.

Date: 2010
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