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From Handshakes to Blockchains: Economic Analysis of Contracts in Agriculture

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Modern Agricultural and Resource Economics and Policy

Part of the book series: Natural Resource Management and Policy ((NRMP,volume 55))

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Abstract

This chapter integrates discussion of historically separate literatures regarding the analysis of agricultural contracts as farmgate contracts between producers and first handlers, contracts between private parties at other stages of the agro-food chain, and policy contracts that involve the government. It discusses different approaches economists have taken to modeling agricultural contracts and how the use of contracts in agriculture and their market implications have evolved over time. It concludes with an exploration of the next stage of contract use in agriculture through the emergence of blockchain technology as a means of supply chain management and the implications for future research.

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Notes

  1. 1.

    “Adverse selection” refers to a situation in which there is “hidden information.” The principal would like to condition the contract on information known solely to the agent. “Moral hazard” refers to a situation in which there is a “hidden action.” The principal would like to condition the contract on an action by the agent that the principal cannot observe.

  2. 2.

    Formally, complementarity is modeled using supermodularity. A function f:Rn → Rn is supermodular if for all x, x´ ∈ Rn, f(x) + f(x´) ≤ f(x^x´) + f(x ∨x´) where x^x´ is the vector of minimum elements whose ith element is the minimum of xi and x´i and x ∨x´ is the vector of maximum elements whose ith element is the maximum of xi and x´i.

  3. 3.

    beefledger.io

  4. 4.

    https://www.irelandcraftbeers.com/blog/view/42/introducing-downstream-the-worlds-first-blockchain-beer

  5. 5.

    https://sawtooth.hyperledger.org/examples/seafood.html

  6. 6.

    https://www.wsj.com/articles/latest-use-for-a-bitcoin-technology-tracing-turkeys-from-farm-to-table-1508923801

  7. 7.

    https://cointelegraph.com/news/agriculture-giants-team-up-on-blockchain-platform-to-track-grains-in-brazil

  8. 8.

    Holmstrom (1982) defines a team as “a group of individuals who are organized so that their productive inputs are related.” Moral hazard may occur in teams even if output is perfectly observed if individuals’ inputs are not because each one has an incentive to free-ride on the input provided by others.

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Author information

Authors and Affiliations

  1. Department of Agricultural and Resource Economics, University of California, Davis, CA, USA

    Rachael E. Goodhue

Authors
  1. Rachael E. Goodhue
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Correspondence to Rachael E. Goodhue .

Editor information

Editors and Affiliations

  1. Dyson School of Applied Economics and Management, Cornell University, Ithaca, NY, USA

    Harry de Gorter

  2. School of Economic Sciences, Washington State University, Pullman, WA, USA

    Jill McCluskey

  3. International Food Policy Research Institute, Washington, DC, USA

    Johan Swinnen

  4. Department of Agricultural and Resource Economics, University of California, Berkeley, CA, USA

    David Zilberman

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Goodhue, R.E. (2022). From Handshakes to Blockchains: Economic Analysis of Contracts in Agriculture. In: de Gorter, H., McCluskey, J., Swinnen, J., Zilberman, D. (eds) Modern Agricultural and Resource Economics and Policy. Natural Resource Management and Policy, vol 55. Springer, Cham. https://doi.org/10.1007/978-3-030-77760-9_18

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