We analyze the contract settlement data of a poultry company who contracts the production of broiler chickens with a group of independent growers. The company originally used rank-order (ordinal) tournaments to compensate their contract growers and later switched to cardinal tournaments. Based on the observed payment mechanism we construct an empirical model of a rank-order tournament game and ...

Numerous studies have considered penalty as part of lease contract stipulation, which incurs whenever equipment downtime exceed a predetermined level. Under this stipulation, lessor would then choose maintenance effort level just enough to hinder them from penalty. Since it is used for business purpose, lower equipment downtime would always preferable for the lessee but necessarily for the less...

National advertising is an important ongoing marketing activity in a franchise arrangement. A majority of franchisors require franchisees to pay an advertising royalty as a percentage of gross revenues while some require franchisees to pay a fixed advertising fee. These payments are earmarked for national advertising. We investigate the relationship between the franchisor’s profits and the diff...

This paper examines the bidding for school milk contracts in Florida and Texas during the 1980s. In both states firms were convicted of bid-rigging. The data and legal evidence suggest that the cartels in the two states allocate contracts in different ways: One cartel divides the market among members, while the other cartel also uses side payments to compensate members for refraining from biddi...

This article studies the role of installment payments in relationships characterized by moral hazard and sunk costs. We rule out vertical integration and payments contingent on the product of the contractor. Instead, each payment is negotiated as and when made. In such circumstances, an initial (down)payment serves to redress the weakness of the contractor in ex post renegotiations. Ifhigher ef...

The decision to adopt a potentially profitable but unfamiliar conservation technology is cast in a multi-period Bayesian framework. Specifically, dairy farmers who are both risk-averse and susceptible to peer group influence progressively learn about the true impact of adopting reduced phosphorus dairy diets on their income distributions as they repeatedly experiment with this new technology. E...

To supply ecosystem services, private landholders incur costs. Knowledge of these costs is critical for the design of conservation-payment programs. Estimating these costs accurately is difficult because the minimum acceptable payment to a potential supplier is private information. We describe how an auction of payment contracts can be designed to elicit this information during the design phase...

Independent firms may be interested in collaborative alliances in order to reduce their costs and risks, among others benefits. Particularly in operations, different firms can gain from economies of scale by pooling their production resources. Even though there may be a significant reduction of the overall cost, the success of the partnership may generally depend on the fairness of the agreemen...