Transaction Costs and the Design of Cropshare Contracts
Modern cropshare contracts are explained using a model in which agents are risk neutral and contract rules are chosen to maximize expected joint wealth. It is shown that the farmer either bears the entire cost of inputs or shares the costs with the landowner in the same proportion as the output. The...
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| Published in: | The Rand journal of economics Vol. 24; no. 1; pp. 78 - 100 |
|---|---|
| Main Authors: | , |
| Format: | Journal Article |
| Language: | English |
| Published: |
Mount Morris, Ill
Rand
01.04.1993
The RAND Corporation Rand Corp Rand Corporation |
| Series: | RAND Journal of Economics |
| Subjects: | |
| ISSN: | 0741-6261, 1756-2171 |
| Online Access: | Get full text |
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| Abstract | Modern cropshare contracts are explained using a model in which agents are risk neutral and contract rules are chosen to maximize expected joint wealth. It is shown that the farmer either bears the entire cost of inputs or shares the costs with the landowner in the same proportion as the output. The incentives of altering the cropshare percentage are examined and are used to derive implications about the portion of the crop that will be owned by the farmer. The model is tested and supported using data from a 1986 survey of farmers and landowners in Nebraska and South Dakota. |
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| AbstractList | Modern cropshare contracts are explained using a model in which agents are risk neutral and contract rules are chosen to maximize expected joint wealth. It is shown that the farmer either bears the entire cost of inputs or shares the costs with the landowner in the same proportion as the output. The incentives of altering the cropshare percentage are examined and are used to derive implications about the portion of the crop that will be owned by the farmer. The model is tested and supported using data from a 1986 survey of farmers and landowners in Nebraska and South Dakota. Modern cropshare contracts are explained using a model in which agents are risk neutral and contract rules are chosen to maximize expected joint wealth. It is shown that the farmer either bears the entire cost of inputs or shares the costs with the landowner in the same proportion as the output. The incentives of altering the cropshare percentage are examined and are used to derive implications about the portion of the crop that will be owned by the farmer. The model is tested and supported using data from a 1986 survey of farmers and landowners in Nebraska and South Dakota. With striking clarity the data show the input-sharing dichotomy predicted by the model. In these 2 Midwestern states farmers either pay all input costs or share them in the same proportion as their share of the crop. The 1986 data also show that proportional input sharing is more likely as the farmer's share of the output decreases. Inputs readily purchased in the market are more likely to be shared than other inputs. |
| Author | Allen, Douglas W. Lueck, Dean |
| Author_xml | – sequence: 1 givenname: Douglas W. surname: Allen fullname: Allen, Douglas W. – sequence: 2 givenname: Dean surname: Lueck fullname: Lueck, Dean |
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| ContentType | Journal Article |
| Copyright | Copyright 1993 Rand Copyright Rand Corporation Spring 1993 |
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| DOI | 10.2307/2555954 |
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| Snippet | Modern cropshare contracts are explained using a model in which agents are risk neutral and contract rules are chosen to maximize expected joint wealth. It is... |
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| SubjectTerms | Agricultural economics Agricultural land Agricultural production Coefficients Community supported agriculture Contracts Costs Crop economics Crop insurance Crops Data Economic models Farm economics Farmers Fertilizers Landowners Sharecropping Sharing Statistical analysis Studies Transaction costs Variable costs Wealth |
| Title | Transaction Costs and the Design of Cropshare Contracts |
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