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- Title
Do Transaction Costs and Risk Preferences Influence Marketing Arrangements in the Illinois Hog Industry?
- Authors
Franken, Jason R. V.; Pennings, Joost M. E.; Garcia, Philip; Lambert, David K.
- Abstract
Risk reduction and transaction costs are often used to explain contracting in the U.S. hog industry with little empirical support. Using a unified conceptual framework that draws from risk behavior and transaction cost theories, in combination with unique survey and accounting data, we demonstrate that risk preferences and asset specificity impact Illinois producers' use of contracts and spot markets. In particular, producers' investments in specific hog genetics and human capital are related to selection of long-term marketing contracts over spot markets. Producers who perceive greater levels of price risk and/or are more averse are more (less) likely to use contracts (spot markets).
- Subjects
ILLINOIS; SWINE; TRANSACTION costs; CONTRACTS; RISK management in business
- Publication
Journal of Agricultural & Resource Economics, 2009, Vol 34, Issue 2, p297
- ISSN
1068-5502
- Publication type
Article