Regulating Broiler Contracts: Tournaments versus Fixed Performance Standards

12 Pages Posted: 24 Mar 2020

See all articles by Theofanis Tsoulouhas

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

Multiple version iconThere are 2 versions of this paper

Date Written: November 2001

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 article 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, can 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.

Keywords: contracts, tournaments, moral hazard, multiple agents, regulation, D820, L140, L150, Q130

Suggested Citation

Tsoulouhas, Theofanis and Vukina, Tomislav, Regulating Broiler Contracts: Tournaments versus Fixed Performance Standards (November 2001). American Journal of Agricultural Economics, Vol. 83, Issue 4, pp. 1062-1073, 2001, Available at SSRN: https://ssrn.com/abstract=3558631 or http://dx.doi.org/10.1111/0002-9092.00230

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)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
2
Abstract Views
130
PlumX Metrics