The Role of Market Power in Agricultural Contracts

I study the economic consequences of shifting bargaining power in relational contracts through interventions such as the formation of a Bargaining Group (BG) for the side of sellers in a market where buyers traditionally hold significant market power. Existing theories of relational contracts predict that such a power transfer will have no impact on market efficiency. In contexts where enforcement institutions are weak, a standard assumption from existing theories of relational contracts - the existence of an enforceable base payment - may not hold. In this case, I show that a transfer of bargaining power can erode market efficiency in a dynamic relational contracting environment, which contradicts findings from existing models of relational contracting. When buyers hold significant market power, they forgo short-term opportunistic behavior by honoring promised performance bonuses in order to keep sellers engaged in trade over time and to accumulate surplus over many periods. With market power eroded by interventions such as the BG, buyers’ long-run gains to trade shirk. When this is coupled with the absence of an enforceable base payment, short-term opportunistic behavior becomes more appealing and trade is more likely to break down. The results here provide policy-makers insight into the economic consequences of enacting policies attempting to balance market power within a framework of fully informal contract enforcement.contracts, incomplete enforcement, bargaining group, distribution, institutions, Agribusiness, Agricultural and Food Policy, Industrial Organization, Institutional and Behavioral Economics, International Development, D86, K12, L14, O12, Q13.,

Designing Contracts for Reducing Emissions from Deforestation and Forest Degradation

Reduction of carbon emissions from deforestation and forest degradation (REDD) has been identified as a cost effective element of the post-Kyoto strategy to achieve long-term climate objectives. The success of REDD depends primarily on the design and implementation of a financial mechanism that provides land-holders sufficient incentives to participate in a REDD scheme. This paper proposes relational contracting as a more appropriate framework for analyzing proposed REDD incentive regimes rather than that of complete contracting enforcement because relational contracting relies upon mutual self-enforcement in a repeated transaction framework, which better suits the stylized facts of REDD. We characterize the optimal REDD relational contract and provide the parameters under which self-enforcement is sustainable. The optimal payment scheme suggests that all payments should be made contingent on the carbon offsets delivered. Thus, the optimal contract does not observe any fixed ex ante payment. Self-enforcement is more difficult to sustain the higher the cost of forest conservation is relative to the value of the carbon offsets from the contract. Necessary extensions to the relational contracting model are also discussed.contracts, incomplete enforcement, carbon sequestration, climate change, institutions, development., Environmental Economics and Policy, Institutional and Behavioral Economics, International Development, Land Economics/Use, D86, K12, L14, O12, Q54, Q56,

Bargaining Power in Relational Contracts: An Experimental Study

This paper provides experimental evidence of the economic impact from shifting bargaining power in relational contracts. I implement an experimental design that adjusts the bargaining power of sellers (agents) and the enforceability of the contract. I find that the vast majority of contracts take the form of efficiency wage contracts instead of contingent performance contracts when enforcement is partially incomplete and sellers have more bargaining power than buyers. The total contracted and actual compensation increase with the bargaining power of the sellers. However, sellers' profits are found to increase only if a part of the total payment is third-party enforceable. In this case, observed surplus and efficiency are lower than predictions. When no part of a contract is third-party enforceable, more cooperative relationships emerge, exhibiting higher quality provision resulting in higher surplus and efficiency while rent sharing is lower. The result is explained by the stronger buyer's deviation, confirming predictions derived in Cordero Salas (2010). The results here provide insight into the economic consequences of enacting policies that improve the bargaining conditions of weaker parties in market settings relying on self-enforcement from underdeveloped legal institutions.contracts, incomplete enforcement, bargaining, experiments, distribution, institutions, Industrial Organization, Institutional and Behavioral Economics, International Development, D86, K12, L14, O12, Q13,

Sistemas de gestión medio ambiental Las normas ISO 14000

32 páginasDe este modo se estudia, en este Cuaderno Técnico, la norma ISO 14000 como instrumento importante para la transformación de procesos productivos ambientalmente amigables, que desempeñan un papel fundamental en el incremento de su competitividad. Se realiza una presentación genérica de las Normas 14000 y se describe su utilización en un sistema de gestión medioambiental. Asimismo se analizan en forma pormenorizada las implicaciones de las normas en la gestión empresarial. El marco político, institucional y legal en que se aplican las normas y los elementos y procesos de implementación de los mismos completan el trabajo

Territorios rurales, competitividad y desarrollo

El enfoque territorial parte de un conjunto de elementos de diagnóstico, entre los que destacan: 1) las características de la economía rural de la región; 2) la heterogeneidad espacial y socioeconómica del sector rural; 3) la diversidad institucional y política de las situaciones locales; 4) la diferenciación de oportunidades y potencialidades presentes en la población rural; 5) las diferencias ecológicas entre unidades territoriales; y 6) los enlaces entre cada unidad territorial y el resto de la economí

Territorios rurales, estrategias y políticas en América Latina

En este artículo se revisan las principales tendencias en la evolución del pensamiento sobre desarrollo rural, su propósito es destacar temas y elementos conceptuales en los cuales se fundamenta el enfoque territorial y a la vez ofrecer una guía a literatura especializada. La segunda sección presenta una revisión de perspectivas recientes que contribuyen a la construcción del enfoque territorial. La tercera sección presenta los principales elementos del enfoque; mientras que en la cuarta sección se presentan antecedentes importantes de dicho enfoque en la práctica del desarrollo rural. Finalmente, en la cuarta sección se presentan las conclusione

Relational Contracts and Product Quality: The Effect of Bargaining Power on Efficiency and Distribution

This paper studies how changes in bargaining power alter the surplus distribution and sustainability of incomplete agricultural contracts. When an enforceable payment exists, selfenforcement is always sustainable, the highest quality is traded, and any surplus distribution is possible. However, there is a limit to how much bargaining power can be exercised when contracts are fully incomplete, as a seller cannot extract too much of the surplus without breaking down the trading relationship. The results provide insight into the limits of policies that attempt to redistribute bargaining power in markets having informal institutions or in which parties rely on implicit contracts

Designing Contracts for Reducing Emissions from Deforestation and Forest Degradation

Reduction of carbon emissions from deforestation and forest degradation (REDD) has been identified as a cost effective element of the post-Kyoto strategy to achieve long-term climate objectives. The success of REDD depends primarily on the design and implementation of a financial mechanism that provides land-holders sufficient incentives to participate in a REDD scheme. This paper proposes relational contracting as a more appropriate framework for analyzing proposed REDD incentive regimes rather than that of complete contracting enforcement because relational contracting relies upon mutual self-enforcement in a repeated transaction framework, which better suits the stylized facts of REDD. We characterize the optimal REDD relational contract and provide the parameters under which self-enforcement is sustainable. The optimal payment scheme suggests that all payments should be made contingent on the carbon offsets delivered. Thus, the optimal contract does not observe any fixed ex ante payment. Self-enforcement is more difficult to sustain the higher the cost of forest conservation is relative to the value of the carbon offsets from the contract. Necessary extensions to the relational contracting model are also discussed

The Role of Market Power in Agricultural Contracts

I study the economic consequences of shifting bargaining power in relational contracts through interventions such as the formation of a Bargaining Group (BG) for the side of sellers in a market where buyers traditionally hold significant market power. Existing theories of relational contracts predict that such a power transfer will have no impact on market efficiency. In contexts where enforcement institutions are weak, a standard assumption from existing theories of relational contracts - the existence of an enforceable base payment - may not hold. In this case, I show that a transfer of bargaining power can erode market efficiency in a dynamic relational contracting environment, which contradicts findings from existing models of relational contracting. When buyers hold significant market power, they forgo short-term opportunistic behavior by honoring promised performance bonuses in order to keep sellers engaged in trade over time and to accumulate surplus over many periods. With market power eroded by interventions such as the BG, buyers’ long-run gains to trade shirk. When this is coupled with the absence of an enforceable base payment, short-term opportunistic behavior becomes more appealing and trade is more likely to break down. The results here provide policy-makers insight into the economic consequences of enacting policies attempting to balance market power within a framework of fully informal contract enforcement