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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Bibliographic Details
Published in:The Rand journal of economics Vol. 24; no. 1; pp. 78 - 100
Main Authors: Allen, Douglas W., Lueck, Dean
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:
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
South Dakota
United States > US
Nebraska
ISSN:0741-6261, 1756-2171
Online Access:Get full text
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Summary: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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ISSN:0741-6261
1756-2171
DOI:10.2307/2555954