Work

Optimal contract design under asymmetric information to incentivize preconditioning calves for feedlots

Year: 2025

Type: article

Abstract: We analyze the equilibrium conditions in which contracts are desirable for firms (buyers) with various levels of management efficiencies procuring a factor input under two levels of quality from supplies. The quality of the factor input, which affects production efficiency, may be known to the buyer; the efficiency of the firm is not known to the supplier. We estimate, using principal-agent models, that firms with high-management efficiency do not have the incentive to pay a quality premium to suppliers, but firms operating with low management efficiency are willing to offer a price premium for quality. The model is applied to the question of preconditioning cattle for the feedlot.

Source: Agricultural and Resource Economics Review

DOI: 10.1017/age.2025.10

Authors: Leslie J. Verteramo Chiu, Loren W. Tauer, Yrjo T. Grohn

Institution: Cornell University

Language: English

Topic: Livestock Farming and Management

Subfield: Agronomy and Crop Science

Field: Agricultural and Biological Sciences

Domain: Life Sciences

SDG: Zero hunger

Open Access status: gold

Estimated APC paid: $2,600