Balancing Grower Protection Against Agency Concerns: An Economic Analysis of Contract Termination Damages

摘要: This study examines legislation that would grant growers termination damages if their contracts are terminated. Our model suggests that, with no contracting frictions, not reduce ex ante efficiency as processors can contract around through restructuring. Growers earn less under continuation but be protected terminated, although overall expected profits unaffected. However, when friction exist, then losses occur constrained in restructuring contractual incentives to deal moral hazard. Growers' increase while processors' profit decrease.