Quality Control through Retailing Contracts--On the Role of Agricultural Cooperative

Speaker: Jianyu Yu, professor of Research Institute of Economics and Management, Southwestern University of Finance and Economics

Venue: Room 418, School of Economics, Yuquan Campus

Abstract: Agricultural cooperatives (coops) play an important role in coordinating production of different stakeholders along the agri-food production chain. However, empirical evidence in both developed and developing countries shows that coops are inefficient in providing quality and high-value added products. Question arises why coops still prevail in coordinating quality provision of retailers in the agri-food chain? In this paper, we develop a model to investigate the efficiency of contract and organizational arrangement when farmers' individual quality is not observed by the DS firm. We focus on two prevailing cases in agri-food sector: 1) DS firm directly deals with individual farmers based on a secret (non comitment) contract; 2) DS firm deals with farmers by contracting with a farmer-owned coop. Secret contracts create inefficiency (lower quality and lower quantity) because of the opportunistic behavior of DS firm; while coop may also entail inefficiency because the free-riding problem. We show how the DS firm can design a contract that corrects the free-riding distortion of a coop and achieves the efficiency when DS firm observe individual quality. This paper thus provides a new explanation on the positive role of coop in quality provision along agri-food chain.

Introduction: Currently Jianyu Yu is a professor at the Research Institute of Economics and Management, Southwestern University of Finance and Economics. she received her PhD at Toulouse School of Economics, France in 2009.  My research focuses on topics in industiral organization, with special insterest in the agricultural and food sector and agricultural policy. She has published several papers inEurpoean Review of Agricultural Economics, Journal of Retailing, Economics Letters.