Impact of Third-Party Enforcement of Contracts in Agricultural Markets - A Field Experiment in Vietnam

Christoph Saenger, Maximo Torero and Matin Qaim

No 143583, GlobalFood Discussion Papers from Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development

Abstract: We study the effect of alleviating information asymmetry regarding product quality that is widespread in developing-country agricultural markets. Opportunistic buyers may underreport quality levels back to farmers to reduce the price they have to pay. In response, farmers may curb investment, negatively affecting farm productivity. In an experiment, we entitle randomly selected smallholder dairy farmers in Vietnam to independently verify milk testing results. Treatment farmers use 13 percent more inputs and also increase their output. We show that the buying company had initially not underreported product quality, which is why third-party monitoring led to a Pareto improvement in the supply chain.

Keywords: Agribusiness; Industrial Organization; Institutional and Behavioral Economics; International Development; Livestock Production/Industries (search for similar items in EconPapers)
Pages: 40
Date: 2013-01
New Economics Papers: this item is included in nep-agr, nep-dev, nep-exp and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Impact of Third-Party Enforcement of Contracts in Agricultural Markets–A Field Experiment in Vietnam (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:gagfdp:143583

DOI: 10.22004/ag.econ.143583

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