Product Quality and Grower Reputation: Dynamic Contracts With Adverse Selection

We investigate the design of a two-period contract between an agricultural processor and growers whose quality-ability types are not observable to the processor. After characterizing the optimal contracts and establishing conditions for a separating equilibrium, we investigate how a payment based on first-period reputation may induce more first-period effort. We show that this reputation-based payment can improve both the processor's and the grower's welfare, resulting in a dominant equilibrium.

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Year of publication:	2005
Authors:	Wang, Yanguo ; Jaenicke, Edward C.
Institutions:	Agricultural and Applied Economics Association - AAEA
Subject:	Agribusiness

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Extent:	application/pdf
Series:	2005 Annual meeting, July 24-27, Providence, RI.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series 2005 Annual meeting, July 24-27, Providence, RI Number 19543
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005039117