averse or because he faces higher variance in his income. Hence, these latter two
parameters can be jointly identified, ρσs2 , as both act on the producer’s risk premium in
a similar way.
For the purposes of the simulation, we consider an identical number of processors
and growers, varying from 1 to 40, in steps of 5. Likewise, we assume that ρσs2 to take
values 0, 0.000001, 0.00001 and 0.00018. Still larger values for ρσs2 do not
substantially affect the results of simulation exercise reported in this section. Using the
equations explained in the models, we calculate the grower’s effort in quantity in each
contractual mechanism for each of possible combinations, which is illustrated in Figure
1. This process has been repeated for the grower’s effort in quality and the total certain
equivalent (see figures 2 and 3, respectively).
ρσ2=0
ρ σ2 =0.00001
♦----♦ Incentive Contract Market
Figure 1. Comparing grower’s effort in quantity with incentive contract and spot market
More intriguing information
1. Cross-Country Evidence on the Link between the Level of Infrastructure and Capital Inflows2. Income Taxation when Markets are Incomplete
3. The Complexity Era in Economics
4. The name is absent
5. CHANGING PRICES, CHANGING CIGARETTE CONSUMPTION
6. Can genetic algorithms explain experimental anomalies? An application to common property resources
7. Olive Tree Farming in Jaen: Situation With the New Cap and Comparison With the Province Income Per Capita.
8. Sex-gender-sexuality: how sex, gender, and sexuality constellations are constituted in secondary schools
9. The name is absent
10. Optimal Rent Extraction in Pre-Industrial England and France – Default Risk and Monitoring Costs