Farmers' Preferences for Crop Contracts

• Main Authors: Kaouthar Lajili, Peter J. Barry, Steven T. Sonka, Joseph T. Mahoney
• Format: Article
• Language: English
• Published: Western Agricultural Economics Association 1997-12-01
• Series: Journal of Agricultural and Resource Economics
• Subjects: contracting; finance; principal-agent; transaction costs
• Online Access: https://ageconsearch.umn.edu/record/30859

An empirical approach combining elements of principal-agent theory and transaction cost economics is used to determine farmers' preferences for contract terms in crop production. The approach is tested by asking grain farmers to rank contract choices and specify price premiums in simulated case situations. The statistical results indicate that farmers' preferences for rates of cost sharing, price premiums, and financing arrangements are significantly influenced by asset specialization and uncertainty associated with the case situations, and by selected business and personal characteristics.