The role of farmers’ trust, risk and time preferences for contract choices: Experimental evidence from the Ghanaian pineapple sector

Abstract

We study the role of trust, risk and time preferences for farmers’ contract choices in a discrete choice experiment among Ghanaian pineapple farmers. We find that experimental measures of trust, risk and time preferences can predict preferences for contract attributes. Especially trust has economically important negative effects on the willingness to pay for high transparency in quality controls. Differences in preferences for timing of payment and timing of agreement making are partly explained by trust preferences and partly by time preferences. The importance of risk-sharing in form of lower quality grades accepted by the buyer increases with farmers’ risk-aversion, while risk preferences do not seem to be related to the timing of agreement making. Our results indicate that preferences affect farmers’ participation constraints and argue that a diversification of contract offers might increase the willingness of farmers to participate in contract farming. This has implications for companies who aim at developing stable long-term relationships with farmers.