adapting contract theory to fit contract farming this article discusses the current state of contract theory and its usefulness for conceptualizing issues related to agricultural contracting i will discuss the limitations of existing theory for applied work and what methodological improvements are needed to enhance the usefulness of the theory to agricultural economists one pervasive problem is that the canonical economic literature on contracts is rather fragmented and the various methodological strands are narrow in their focus as such there is a need for agricultural economists to engage in methodological research to develop applied contracting models that can capture higher order features of real world agricultural contracts while delivering generalizable comparative statics predictions the need for such research is obvious as contracting continues to expand along the entire modern food marketing channel in the latter part of this article i develop a simple model to illustrate how classic methodological approaches can be combined with recent developments in contract and game theory to construct applied theory models that are useful for capturing some important features of agricultural contracts

the performance of agricultural market advisory services in corn and soybeans the purpose of this article is to evaluate the performance of market advisory services for the 1995 2003 corn and soybean crops a new database from the agricultural market advisory services agmas project is used in the evaluation this database should not be subject to survivorship and hindsight biases overall the results provide little evidence that advisory services as a group outperform market benchmarks particularly after considering risk the evidence is more positive versus the farmer benchmarks even after taking risk into account results also suggest that it is difficult to predict the pricing performance of advisory services across crop years

exploring the determinants of emerging bioenergy market participation abstract individual biomass producers will play a strong role in the emergence of robust and sustainable bioenergy markets research on what drives their participation however is substantial but fragmented despite a recognition of producer heterogeneity there have also been few comparative analyses of drivers of bioenergy market participation across feedstock types producer groups and geographic regions through narrative review and network analysis the following review of the bioenergy market participation literature generates both an increased appreciation of how bioenergy market participation is assessed in existing research and how social network analysis may be further employed as a tool for literature review across 41 studies selected for qualitative review and a subset of 22 selected for quantitative review the analysis reaches two central conclusions the first pertains to the findings of the literature itself suggesting that a variety of non production objectives structural and social constraints and market related attributes influence bioenergy market participation decisions a second conclusion is that the assessment of these factors varies significantly across the literature for both user group and feedstock type further examination of the individual variables within these segments of the literature as well as of authorship patterns across them suggests that this variation may rise from differences in the subject matter itself and not from differing perspectives of the researchers undertaking the work should disparities in the literature be reflective of actual socio economic differences in their respective markets policies or programs targeted to individual feedstock types or user groups may be more effective in encouraging participation than uniform national policy initiatives

the principal agent relationship with an informed principal ii common values in many circumstances a principal may have relevant private information when she proposes a contract to an agent we analyze such a principal agent relationship as a noncooperative game the principal proposes a contract which is accepted or rejected by the agent who for most of our analysis has no private information the contract is executed if accepted otherwise the reservation allocation takes effect this allocation may be determined by a pre existing contract which the principal by her proposal is attempting to renegotiate or it may simply be the no trade point in this paper we assume that the principal s information directly affects the agent s payoff before solving the game we discuss pareto efficiency with asymmetric information we define an incentive compatible allocation to be weakly interim efficient wie if there exists no alternative incentive compatible allocation that both parties prefer for all possible beliefs that the agent might have about the principal s private information type we show that any wie allocation is interim efficient ie for some beliefs the rothschild stiglitz wilson rsw allocation relative to the reservation allocation l is the allocation that maximizes the payoff of each type of principal within the class of incentive compatible allocations that guarantee the agent at least the utility he gets from a irrespective of his beliefs about the principal s type the equilibrium set of the contract proposal game consists of the allocations that weakly pareto dominate the rsw allocation thus there is a unique equilibrium outcome if and only if the latter is ie and the equilibrium outcome is the rsw allocation itself after characterizing the equilibrium allocations we study those that are renegotiation proof when either the principal or the agent leads the renegotiation we then compare our contract proposal game which is a signaling model with its screening counterpart we conclude by extending our results to the case in which the agent as well as the principal has private information under the assumption of quasi linear preferences

contracting with imperfect commitment and noisy communication abstract this paper provides new analytical tools for studying principal agent problems with adverse selection and limited commitment by allowing the principal to use general communication devices we overcome the literature s common but overly restrictive focus on one shot direct communication in addition general communication devices solve two fundamental problems of contracting with imperfect commitment first they allow us to identify the local downward incentive constraints as the relevant ones if the agent s preferences satisfy a single crossing property second we show how one may restrict the cardinality of the message spaces of the communication device an example illustrates our arguments and the suboptimality of one shot direct communication

farmers willingness to contract switchgrass as a cellulosic bioenergy crop in kansas farmers adoption of cellulosic biofuel feedstock enterprises plays an important role in the future of agriculture and the renewable fuels industry however no set markets currently exist for bioenergy feedstocks outside of very localized geographic locations and farmers may be reluctant to produce the feedstocks without contracts that help mitigate uncertainty and risk this study examines farmers willingness to grow switchgrass under contract using a stated choice approach data were collected using an enumerated survey of kansas farmers and analyzed using latent class logistic regression models farmers whose primary enterprise is livestock are less inclined to grow switchgrass shorter contracts greater harvest flexibility crop insurance and cost share assistance increase the likelihood that farmers will grow switchgrass for bioenergy production

renegotiation and information revelation over time the case of optimal labor contracts the paper analyzes the issue of commitment in grossman and hart s model of optimal labor contracts under asymmetric information about firm profitability we extend their framework by allowing employment to vary over time at equidistant intervals when both parties can precommit ex ante not to renegotiate the contract this replicates the grossman hart outcome each subperiod when precommitment is not possible information revealed through the contract can create pareto improving renegotiation opportunities and the issue of optimal information revelation arises the paper analyzes the impact of ex post pareto improving renegotiations on the optimal contract

relational incentive contracts standard incentive theory models provide a rich framework for studying informational problems but assume that contracts can be perfectly enforced this paper studies the design of self enforced relational contracts i show that optimal contracts often can take a simple stationary form but that self enforcement restricts promised compensation and affects incentive provision with hidden information it may be optimal for an agent to supply the same inefficient effort regardless of cost conditions with moral hazard optimal contracts involve just two levels of compensation this is true even if performance measures are subjective in which case optimal contracts terminate following poor performance jel c73 d82 l14

new methodology for the ecological footprint with an application to the new zealand economy abstract sustainable development has become a primary objective for many countries throughout the world since the late 1980s a major difficulty associated with sustainable development objectives however is the absence of reliable indicators to measure progress towards the goal of sustainability the ecological footprint provides an estimate of the land area necessary to sustain current levels of resource consumption for a given population on an aggregate basis the ecological footprint may be compared with the amount of ecologically productive land available to give an indication of whether consumption patterns are likely to be sustainable this paper proposes the use of a modified form of input output analysis to calculate the ecological footprint the input output approach provides a consistent means of calculating an ecological footprint using data collected as part of the system of national accounts in most developed countries in addition it makes explicit the link between the level of economic activity in a country and its corresponding impact on the environment an application of this methodology to new zealand indicates that it takes 3 49 has of ecologically productive land per year to sustain the average new zealander s current level of consumption

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

contract theory and implications for perennial energy crop contracting abstract this article provides an overview of modern contract theory and discusses the implications of the theory for contracting for perennial dedicated energy crops we discuss some of the unique challenges of contracting for dedicated energy crops used for the production of advanced biofuels and survey some of the relevant concepts and research from the contract theory literature to address these challenges we focus primarily on the mechanism design or complete contracts approach to contracting which involves optimizing some objective function e g profits costs etc with respect to contract terms subject to important incentive constraints the solution to these optimization problems typically highlight important tradeoffs that a contract designer needs to consider in order to maximize profits and or minimize costs

commitment through renegotiation proof contracts with third parties the paper analyzes contracts as means of strategic commitment that is commitment against outside parties to the agreement it considers the example of an incumbent firm which enters a contractual relationship with its workers in order to deter entry it assumes away the possibility for the parties to precommit not to make pareto improving renegotiations of the agreement once entry has taken place under symmetric information the contract is thus found to be useless for entry deterrence if the incumbent firm or workers possess some private information excessive post entry production levels can however be sustained ex post since output reductions may not be incentive compatible while information asymmetries are usually welfare decreasing when the goal is optimal risk sharing they can thus be welfare improving for the contracting parties when commitment against outsiders is the goal of the contract the role of the renegotiation process as a constraint on sustainable agreements is stressed in the paper and the general relevance of strategic contractual commitment is discussed

show me the money the value of college graduate attributes as expressed by employers and perceived by students employers of agricultural undergraduates are presented with hypothetical job candidates with different attributes and salaries and are asked which candidate if any they would hire the employer choices are then used to estimate the additional salary they will pay for undergraduates with certain attributes students are administered similar surveys where they indicate which hypothetical candidate they think will be hired which can be used to estimate students perceived salary increase associated with each attribute employers stated values are then compared to students perceived values to identify any misperceptions regarding the monetary return of select attributes

biomass feedstock contracts role of land quality and yield variability in near term feasibility abstract in the absence of an infrastructure for the harvest storage and purchase of cellulosic biomass contracting is an important mechanism through which biorefineries can ensure adequate feedstock supply we develop an optimization model to assess the economic potential of dedicated energy crops when profit maximizing farmers allocate croplands of varying quality toward biomass in response to multi year contracts we evaluate the economic competitiveness of perennial grasses with traditional commodity crops in a case study of switchgrass production in tennessee assuming short term contracts we consider the importance of payment structure land quality energy crop yield and projected commodity crop returns on a farmer s decision to accept a contract for biomass production we find that a wholesale contract in which the farmer is guaranteed a price per unit biomass is most effective on the highest quality of land while a contract in which the farmer is guaranteed a price per acre is most effective on lower quality land from the biorefinery perspective a wholesale contract is most effective for short term contracts while an acreage contract is most effective for long term contracts breakeven pricing will only secure feedstock from farmers who produce commodity crops with unfavorable price outlooks on lower quality land therefore the contract price must include a premium in order to compete for space in the crop mix the yield profile of energy crops has a significant effect on the terms at which short term contracts will be accepted and land allocated toward feedstock production the extent to which energy crop yields observed in field trials can be maintained at commercial scale also has a substantial effect on the scale at which farmers would be willing to participate in energy crop production

from green growth to sound policies an overview abstract green growth is an attractive slogan with a variety of possible meanings this essay critically examines several potential meanings of this slogan and provides a brief overview of some of the main implications of the other papers in this special issue taken together these papers argue for the importance of careful analysis of energy environmental policies particularly ambitious ones claiming to offer huge benefits with little or no cost

investment and screening under asymmetric endogenous information this article provides an analysis of screening contracts in a complete but imperfect information environment as opposed to the usual incomplete information bayesian environment an agent faces a hold up situation while making a cost reducing specific investment that is not observed by the principal to prevent the hold up the agent randomizes his investment strategy and the principal offers a screening contract the informational rents provided by the equilibrium contract finance the investment for a large class of cost functions the randomization is such that the marginal surplus follows a power distribution

a three perspective view of greenhouse gas emission responsibilities in new zealand abstract while responsibility for the environmental impacts of production has been commonly assigned to producers production is driven by consumer demand and it is valid to question whether impacts should instead be assigned to consumers however in each of these approaches producers and consumers either bear the full burden of responsibility or none at all an example of this is the kyoto protocol where all greenhouse gas emissions are assigned to the producer and no consideration is given to where goods are finally consumed rather than taking the conventional producer or consumer responsibility approach a third perspective is possible in which responsibility is shared we use input output analysis to apply all three of these responsibility perspectives to new zealand s domestic greenhouse gas emissions our main findings from the shared responsibility approach are that new zealand producers are responsible for 44 of domestic emissions new zealand consumers take 28 and 27 are exported a shared responsibility approach appears to distribute the burden of responsibility and associated liability between parties more fairly and is likely to be more widely acceptable than pure producer or consumer perspectives

implicit contracts incentive compatibility and involuntary unemployment this paper considers the enforceability of employment contracts when employees performance cannot be verified in court so that piece rate contracts are not legally enforceable part i shows that there exists a variety of self enforcing implicit contracts modelled as perfect equilibria in a repeated game and characterizes all the wage and performance outcomes that can be implemented implementation requires a strictly positive surplus from employment the form of the contract depending on how this surplus is divided between firm and employee piece rate contracts and contracts with an informally agreed bonus can be made self enforcing but the use of severance pay and bonding does not extend the set of implementable allocations the resulting contracts resemble actual labor contracts more than do the contracts in standard principal agent models part ii analyses market equilibrium with these contracts also modelled as perfect equilibria in a repeated game and shows that many such equilibria exist unfilled vacancies and unemployed workers can co exist despite the existence of contracts that are potentially mutually beneficial for those jobs that are filled any division of the potential surplus is possible so that the market can have at the same time involuntary unemployment and vacancies that are unfilled despite filled jobs earning positive profits as a criterion for selecting equilibria a notion of renegotiation proofness is applied then either all workers are employed or all jobs filled but any division of the potential surplus is still possible the paper explores what further restrictions on beliefs give rise to a walrasian outcome in which all the potential surplus goes to the short side of the market and to an efficiency wage type outcome in which the potential surplus goes to the long side

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem

on indescribable contingencies and incomplete contracts abstract i examine the theoretical foundations underlying the incomplete contracts literature a common justification for the assumption that contracts are not fully contingent on the state of nature is to point out that some aspects of the state may be unforeseen or indescribable to the contracting partners at the time the contract is written i argue however that as long as risk averse parties can foresee the probabilities of their possible payoffs then the fact that they cannot describe the possible physical states does not matter even with renegotiation the parties can attain the same welfare as when full description is possible