Interactions between Explicit and Implicit Contracting: Evidence from California Agriculture

Brent Hueth (), Ethan Ligon and Tigran Melkonyan ()

No 6068, 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: We examine interactions among explicit and implicit contracting practices for a sample of 385 intermediaries in California fruit and vegetable markets. Explicit practices are measured with an indicator for the existence of a formal contract, and with indicators for various contract specifications (e.g., target delivery date, volume, acreage). Implicit practices are measured directly with a question about the existence of an “implicit understanding,” and indirectly with questions about the extent of informal involvement in farm-level decision making. Firms that manufacture processed foods, and that grow in house a portion of their total farm input, are significantly more likely to report use of explicit and implicit contracting practices. Additionally, unobserved factors that influence the use of explicit and implicit contracting are positively correlated. These findings suggest a complementary relationship between formal and informal contracts.

Keywords: Agribusiness; Farm Management (search for similar items in EconPapers)
Pages: 20
Date: 2008
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea08:6068

DOI: 10.22004/ag.econ.6068

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