Specific Performance, Separability Condition and the Hold-Up Problem

Edlin and Reichelstein (1996) claim that an efficient solution to the hold-up problem can be implemented with a specific performance contract if a separability condition is satisfied, i.e. if the effect of investments and the effect of the state of the world enter the parties valuation functions in an additively separable manner. This note shows that this separability condition generates the same solution than if the valuation functions are independent of the sate of nature (proposition 1). This implies that a simple menu of prices that does not specify the level of trade can solve the hold-up problem (proposition 2). That is, specifying the terms of trade by writing a specific performance contract is useless with the separability condition.incomplete contract, specific performance, hold-up

Voluntary approaches to food safety: New insights

Food safety economists have raised numerous questions according to the emergence and the multiplication of safety quality management system within the food supply chain. However, few research deal with the voluntary implementation by firms of these systems (Segerson, 1999; Venturini, 2003; Noelke- Caswell, 2000). Our paper aims to develop a unified analytical framework of these research. We obtain three results. First, in a market model when the mandatory threat is strong, the voluntary adoption of safety measures is an equilibrium without need of the cost differential assumption (Segerson, 1999) nor of a reputation effect (Venturini, 2003). Second, when the mandatory threat is weak the reputation effect and the rule of liability could induce the voluntary adoption on different extent depending on the situation of safety contamination. Third, in a supply chain model we introduce a retailer and show that a well designed contract offered by the retailer induce upstream firms to voluntarily implement safety measures. Private incentives are thus very powerful and can be used as the sole mechanism to implement the efficient system.Food Safety, Voluntary Approaches, Supply Chain, Food Consumption/Nutrition/Food Safety,

Tournament Mechanism in the Wine-Grape Contracts: Evidence from a French Wine Cooperative

This article analyzes the contractual relationship between a wine cooperative (winery) and its member (growers). This relationship is plagued by moral hazard and adverse selection problems in grape quality. Indeed, growers can be opportunistic since the cooperative is unable to observe: (i) their effort level due to imperfect monitoring technology; (ii) their productive abilities (types) due to adverse selection. Because the growers’ vineyard practices and efforts are one of the main determinants of grape quality, the cooperative implements an incentive compensation system to induce growers to provide the maximum effort towards quality. This compensation scheme is similar to that in tournaments (Lazear and Rosen, 1981; Green and Stokey, 1983; Knoeber, 1989; Prendergast, 1999). In our case, the cooperative promotes competition between growers by offering a promotion, while, at the same time, organizing the contest by creating homogenous groups of growers using a menu of contracts and monitoring through regular visits to the vineyard. Using a database of 1219 contracts, we test the effect of: (i) the cooperative’s tournament compensation scheme; (ii) the menu of contracts and monitoring mechanism. The results of our econometric estimations provide some confirmation of both effects. (JEL classification: L14, D82, Q13

Tournament Mechanism in the Wine-Grape Contracts: Evidence from a French Wine Cooperative

This article analyzes the contractual relationship between a wine cooperative (winery) and its member (growers). This relationship is plagued by moral hazard and adverse selection problems in grape quality. Indeed, growers can be opportunistic since the cooperative is unable to observe: (i) their effort level due to imperfect monitoring technology; (ii) their productive abilities (types) due to adverse selection. Because the growers’ vineyard practices and efforts are one of the main determinants of grape quality, the cooperative implements an incentive compensation system to induce growers to provide the maximum effort towards quality. This compensation scheme is similar to that in tournaments (Lazear and Rosen, 1981; Green and Stokey, 1983; Knoeber, 1989; Prendergast, 1999). In our case, the cooperative promotes competition between growers by offering a promotion, while, at the same time, organizing the contest by creating homogenous groups of growers using a menu of contracts and monitoring through regular visits to the vineyard. Using a database of 1219 contracts, we test the effect of: (i) the cooperative’s tournament compensation scheme; (ii) the menu of contracts and monitoring mechanism. The results of our econometric estimations provide some confirmation of both effects. (JEL classification: L14, D82, Q13

Wine Brokers as Independent Experts

This paper aims to show that an institutional arrangement such as brokerage is an efficient coordination mechanism to mitigate the contractual hazards in the relationship between merchants and wine growers. We explain its efficiency by considering brokers as independent experts that can help merchants to monitor the growers' wine-making process. More precisely, when the merchant cannot observe the grower's production effort and finds it costly to commit to a credible monitoring of the wine quality process, it can be efficient to delegate the monitoring task to the broker. Thus, delegation to a third party has a commitment effect.

Product-service systems in direct crop-livestock relationships

International audienceA major restructuring of the agricultural sector will soon occur that will result in a strong disconnect between stakeholders in the agricultural sector and the location of agricultural production and natural resource utilisation. Moreover, current issues related to economic and social-environmental aspects of agriculture justify the need to change the business model to one where sustainability is the main strategy of agricultural development. A new paradigm of the functionality-based economy – concretised by the product-service system (PSS) approach – has been built around the notion of consumption not being focused on goods, but rather on the services provided by goods. This article analyses seven case studies on the relationships between growers and breeders living in the same territory. It shows that these new organisational models are an interesting alternative that can change farming practices toward greater sustainability through the provision of services that aims to reduce environmental impact and improving eco-efficiency

Voluntary approaches to food safety: New insights

Food safety economists have raised numerous questions according to the emergence and the multiplication of safety quality management system within the food supply chain. However, few research deal with the voluntary implementation by firms of these systems (Segerson, 1999; Venturini, 2003; Noelke- Caswell, 2000). Our paper aims to develop a unified analytical framework of these research. We obtain three results. First, in a market model when the mandatory threat is strong, the voluntary adoption of safety measures is an equilibrium without need of the cost differential assumption (Segerson, 1999) nor of a reputation effect (Venturini, 2003). Second, when the mandatory threat is weak the reputation effect and the rule of liability could induce the voluntary adoption on different extent depending on the situation of safety contamination. Third, in a supply chain model we introduce a retailer and show that a well designed contract offered by the retailer induce upstream firms to voluntarily implement safety measures. Private incentives are thus very powerful and can be used as the sole mechanism to implement the efficient system

Cereal–Legume Intercropping

International audienceWith the current objective of moving away from monoculture and the development of the "ecological intensification" of agrosystems, the cereal-legume intercropping takes advantage of the symbiotic relationships that the legume develops with soil micro-organisms (rhizobiums). Legumes are capable of fixing atmospheric nitrogen thanks to the nodules of its roots, and thus provide to this crop a part of its nitrogen needs. The choice of species and the proportion of grains to be sown are determined by the objectives of intercropping. For human food, simple mixtures are favoured (e.g. wheat/pea, barley/bean, triticale/pea). For fodder production, the number of species can be higher