Figure 1 shows that the effect of the spot market on quantity is only greater than that of
the incidence contract in sceneries characterized by relevant competition and low levels of
growers´ risk premium. On the contrary, in situations with imperfect competition the
contract is more likely to provide incentive for growers to provide a level of quantity higher
than of the spot market. In particular, for an important level of risk premium, independent
from the number of operators, the quantity obtained with the incentive contract is greater
than that obtained with spot market.
Figure 2 shows the values of quality for both mechanisms for all values of risk
premium and number of operators.
In----♦ Incentive Contract Market
Figure 2. Comparing grower’s effort in quality with incentive contract and spot market
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