Risk Sharing and Compensation Guides for Managers and Members of Vertical Beef Alliances

Wayne D. Purcell and William T. Hudson

Review of Agricultural Economics, 2003, vol. 25, issue 1, 44-65

Abstract: Vertical alliances in beef are growing in importance. Alliances struggle with decisions on how to compensate members. Both conceptual development and empirical analysis are needed. A conceptual framework building on transaction cost and principal agent literature is developed and strategies for sharing feeding and packing margins are analyzed. Premiums for high-quality cattle increase revenues to the alliance. Margin and premium sharing interactions are investigated and guidelines are presented. Compensations that provide incentives for improving cattle quality help ensure the success of alliances as vertical coordination and quality control mechanisms.

Date: 2003
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