QUALITY MEASUREMENT AND RISK-SHARING IN CONTRACTS FOR CALIFORNIA FRUITS AND VEGETABLES

Abstract

We hypothesize that imperfect quality measurement in contracts for fresh fruits and vegetables results in a moral-hazard problem, and that the final price of the produce provides additional information regarding quality. As a consequence, growers are not shielded from all price risk. This hypothesis is tested informally with observations on actual contracts in California.Demand and Price Analysis, Risk and Uncertainty,