Incentives, Information Systems, and Competition

14 Pages Posted: 31 Mar 2020

See all articles by Peter Bogetoft

Peter Bogetoft

Copenhagen Business School

Henrik Ballebye Olesen

affiliation not provided to SSRN

Date Written: February 2003

Abstract

We investigate how different competitive regimes affect the ability to provide incentives based on noisy information systems. The set‐up involves multiple producers and processors in the presence of moral hazard and adverse selection. Reduced competition may facilitate incentive provision by allowing more high‐powered incentives. This may rationalize both vertical and horizontal integration as seen in many agricultural markets with uncertain quality grading. On the other hand, if trading terms are settled before the information is observed, a noisy information system may suffice to give proper incentives. This may rationalize the use of long‐term conditional price contracts in the trading of many agricultural products.

Keywords: asymmetric information, market structure, quality, testing

Suggested Citation

Bogetoft, Peter and Olesen, Henrik Ballebye, Incentives, Information Systems, and Competition (February 2003). American Journal of Agricultural Economics, Vol. 85, Issue 1, pp. 234-247, 2003, Available at SSRN: https://ssrn.com/abstract=3564572 or http://dx.doi.org/10.1111/1467-8276.00115

Peter Bogetoft (Contact Author)

Copenhagen Business School ( email )

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HOME PAGE: http://https://www.cbs.dk/en/research/departments-and-centres/department-of-economics/staff/pbeco

Henrik Ballebye Olesen

affiliation not provided to SSRN

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