Governance Issues in the Principal-Agent Framework: Producing Cellulosic Ethanol in Michigan

Vivek Pandey, Aleksan Shanoyan and Brent Ross

No 61362, 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado from Agricultural and Applied Economics Association

Abstract: This article analyzes the incentives and compensation problems faced by cellulosic ethanol producer and logging firms and the consequent impact on the organization of the wood based cellulosic ethanol industry in the US. The success of this relationship is central to setting up the biofuel industry in Michigan and in the US at large. The theoretical results indicate that specification contract under the principal-agent framework is of limited utility due to’ metering’ problem when the principal contracts with multiple agents for the supply of feedstock.. Alternative arrangements including JVs have the potential to provide close to first best solutions.

Keywords: Agribusiness; Institutional and Behavioral Economics; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Pages: 23
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea10:61362

DOI: 10.22004/ag.econ.61362

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