Contracting for Consistency: Hog Quality and the Use of Marketing Contracts

Jang, Jongick; Sykuta, Michael E.

doi:10.2139/ssrn.1372404

Cited by 8 publications

(9 citation statements)

References 29 publications

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“…The need for contextual analysis is obvious, as evidenced by empirical literature which puts forward categories of transaction costs that are specific to the case study. For instance, the focus is on search costs in Gabre-Madhin (2001), on negotiation costs in Mac Innis (2004), on specific asset hold-up safeguards in Cungu et al (2008) and on performance measurement costs in Buvik and Andersen (2002) and Jang and Sykuta (2009). The selection of transaction costs and their sources has to be done through an in-depth transactional analysis of the contractual hazards or collective action issues facing the parties within the institutional arrangements under scrutiny.…”

Section: Comparative Conceptual Framework and Methodologymentioning

confidence: 99%

Marketing cooperative vs. commission agent: The Turkish dilemma on the modern fresh fruit and vegetable market

Lemeilleur

Codron

2011

Food Policy

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Section: Comparative Conceptual Framework and Methodologymentioning

confidence: 99%

Marketing cooperative vs. commission agent: The Turkish dilemma on the modern fresh fruit and vegetable market

Lemeilleur

Codron

2011

Food Policy

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“…Long-term contracts with buyer's requirements help to overcome contractual hazards associated with difficult-to-measure quality (Jang and Sykuta, 2009). According to agency theory, when there is little uncertainty on task programmability and a strong correlation between agents' effort and output (Allen and Lueck, 2003;Sykuta, 2005), the buyer could theoretically design a complete contract, including production practice rules, as in the hog case reported by Jang and Sykuta (2009).…”

Section: Non-contractible Actionsmentioning

confidence: 99%

“…According to agency theory, when there is little uncertainty on task programmability and a strong correlation between agents' effort and output (Allen and Lueck, 2003;Sykuta, 2005), the buyer could theoretically design a complete contract, including production practice rules, as in the hog case reported by Jang and Sykuta (2009). However, uncertainty (Williamson, 1985), complexity (Masten, 1984;Tadelis, 2002) or low task programmability (Mahoney and McNally, 2004) may forego the writing of a complete contract with detailed terms covering all possible events.…”

Section: Non-contractible Actionsmentioning

confidence: 99%

Quality management and contractual incompleteness: grape procurement for high-end wines in Argentina

Codron

Étienne

Rousset

2013

Journal on Chain and Network Science

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Sourcing grapes from independent growers for use in top quality wines sold on the international market is a major organisational challenge for corporate wineries. Our paper adds to the small existing literature addressing these coordination issues in the New World wine sector, by going deeper into the specifics of the contracts, as well as the "transaction cost economising" argument. Based on a case-study carried out in the Argentine province of Mendoza, this article presents an in-depth analysis of the technical process, in order to identify the contractual hazards posed by asset specificity, measurement costs, and non-contractible actions. Drawing on contract completion and dual sourcing literature, it analyses the contractual and non contractual mechanisms (price incentives, grower monitoring, allocation of decision rights to the winery, role of backward integration into production) used to govern such grape transactions. Through our analysis, we were able to arrive at four main conclusions. Firstly, most agreements are still verbal, with the exception of occasional written contracts, limited to a few legal provisions. It became clear to us that this approach to forging agreements is not always adequate in managing the inherently complex interactions between grape varieties, soil, farming practices and wine-making processes in high-end wine production. Secondly, extensive decision rights are allocated to wineries, to deal with incompleteness. These are key decisions to be taken during the cropping and harvesting process. Thirdly, pricing is generally kept flexible, with grape prices negotiated ex-post. This means that trade imbalances tend to be resolved in the long term. Winegrowers also benefit from financial rewards to compensate for allocations. Finally, any potential opportunistic behaviour by wineries with regards to asset specificity (in particular yield limitation) and allocation of rights is kept at bay by mechanisms such as winery reputations and credit third-party guaranty. This type of behaviour by growers is similarly deterred through monitoring and vineyard ownership on the part of the wineries.

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“…The increased demand for lean pork, for example, raises measurement costs (in Barzel's sense), for which marketing contracts can be an effective solution. Jang and Sykuta (2009) argue pork processors' attempts to differentiate their products in response to consumer demands for such difficult‐to‐measure traits explain both the variation in use and design of hog marketing contracts. The challenge here is to explain why preferences have changed for some agricultural commodities but not others 8…”

Section: Why Do Contracting Practices Differ?mentioning

confidence: 99%

The adoption, diffusion, and evolution of organizational form: insights from the agrifood sector

James¹,

Klein²,

Sykuta³

2011

Manage. Decis. Econ.

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The adoption and diffusion of contract farming and vertical integration in modern agriculture has varied widely across regions, commodities, or farm types. This paper lays out a framework for understanding the evolution of organizational practices in U.S. agriculture by drawing on theories of the diffusion of technology and organizational complementarities. Using recent trends as stylized facts, with case studies from various agricultural industries, we argue that research identifying complementarities within specific sectors of the agrifood system will greatly improve our understanding of the organizational structure of agricultural production, and we identify several specific lines of inquiry. Copyright (C) 2011 John Wiley & Sons, Ltd.

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Contracting for Consistency: Hog Quality and the Use of Marketing Contracts

Cited by 8 publications

References 29 publications

Marketing cooperative vs. commission agent: The Turkish dilemma on the modern fresh fruit and vegetable market

Marketing cooperative vs. commission agent: The Turkish dilemma on the modern fresh fruit and vegetable market

Quality management and contractual incompleteness: grape procurement for high-end wines in Argentina

The adoption, diffusion, and evolution of organizational form: insights from the agrifood sector

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