Regulating Broiler Contracts: Tournaments Versus Fixed Performance Standards

NCSU, Department of Economics, Working Paper

31 Pages Posted: 22 Jan 2001  

Theofanis Tsoulouhas

University of California-Merced, School of Social Sciences, Humanities & Arts, The Ernest & Julio Gallo Management Program

Tom Vukina

North Carolina State University - Department of Agricultural & Resource Economics

Date Written: December 2000

Abstract

Grower discontent with tournaments as mechanisms for settling poultry contracts can largely be attributed to the group composition risk that tournaments impose on growers. This paper focuses on the welfare effects of a widely advocated regulatory proposal to prevent integrator companies from using tournaments and replace them with schemes that compare performance to a fixed standard. The analysis shows that the mandatory replacement of tournaments with fixed performance standards, absent any rules that regulate the magnitude of the piece rate, will decrease grower income insurance without raising welfare. However, replacing tournaments with fixed performance standards can simultaneously increase income insurance and welfare, provided that the magnitude of the piece rate is also regulated.

JEL Classification: D800, Q100

Suggested Citation

Tsoulouhas, Theofanis and Vukina, Tom, Regulating Broiler Contracts: Tournaments Versus Fixed Performance Standards (December 2000). NCSU, Department of Economics, Working Paper. Available at SSRN: https://ssrn.com/abstract=254025 or http://dx.doi.org/10.2139/ssrn.254025

Theofanis Tsoulouhas (Contact Author)

University of California-Merced, School of Social Sciences, Humanities & Arts, The Ernest & Julio Gallo Management Program ( email )

Merced, CA 95343
United States
209-228-4640 (Phone)

HOME PAGE: http://tsoulouhas.info

Tomislav Vukina

North Carolina State University - Department of Agricultural & Resource Economics ( email )

Box 8109
3332 Nelson Hall
Raleigh, NC 27695-8109
United States
919-515-5864 (Phone)
919-515-6268 (Fax)

Paper statistics

Downloads
120
Rank
192,955
Abstract Views
1,900