Abstract
Abstract In this paper, we investigate sorting patterns among chicken producers who are offered a menu of contracts to choose from. We show that the sorting equilibrium reveals a positive sorting where higher ability producers self-select themselves into contracts to grow larger chickens and lower ability types self-select themselves into contracts to grow smaller birds. We also show that eliciting this type of sorting behavior is profit maximizing for the principal. In the empirical part of the paper, we first estimate growers’ abilities using a two-way fixed effects model and subsequently use these estimated abilities to estimate a random utility model of contract choice. Our empirical results are supportive of the developed theory.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: The B.E. Journal of Economic Analysis & Policy
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
