The name is absent

On balance, the models developed here provide a satisfactory explanation of why
processors should choose the mechanism that maximizes their wealth and not the levels
of quality. It could explain some of the results obtained by Alexander Goodhue and
Rausser. (2007), which suggested that offering price incentives does not improve
proeessors´ profits.

The simulation exercise presented here leaves unanswered many interesting
questions in contracting. One important aspect of the problem, which we have not
considered, is that many contracts are based on monitoring. We assumed that the
processor can not directly observe grower’s effort or infer it form knowledge of the
output. However, by monitoring him, they can obtain a reasonable estimate of the
grower’s effort level, and thereby dissuade him from shirking. Some monitoring of
growers is often undertaken by processors (Agrawal, 1999).

This paper provides some interesting implications from an agricultural policy
perspective.

It is obvious that each grower faces a trade-off between offering high levels of
quantity (and low quality) versus high levels quality (and low yield) of his agricultural
inputs. Since these attributes are assumed to have an influence on the price received by
the growers, the optimal choice is obviously contingent upon the relationship between
the quantity/quality trade-off and the received price.

In the event that agricultural policy is geared towards increasing the quality in the
agrarian markets, the policy makers could strive to incentive growers to produce quality
by regulating the specified maximum yield per acre. However, the situation is
complicated by the fact that in order to induce growers to produce quality, they must be
offered a compensation for the increase in cost associated with it. And if this
compensation for cost increases is not associated with higher spot prices, it is difficult

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