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.


Subject(s):
Issue Date:
2005
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/19543
Total Pages:
40
Series Statement:
Selected Paper 135004




 Record created 2017-04-01, last modified 2017-04-26

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