CROSS-COMMODITY PERSPECTIVE ON CONTRACTING: EVIDENCE FROM MISSISSIPPI

Cross-Commodity Perspective on Contracting: Evidenc e from Mississippi

gesting that transactions cost are imp ortant in contract participation.   The sign on this

coe¢cient implies that as the amount of transactions cost increases, contracting increases.
There may be some reason to believe that the number of hours used examining market
information is simultaneously determined with whether or not to contract.  However, one

may also argue that examination of market information may reveal the complexities and
di∏culties in marketing, thus leading those producers to deduce that transactions cost are
high and lead them to a greater use of contracting.

This hypothesized relationship may also be reflected through the attitudinal vari-
able EASE. In this case, producers who strongly disagreed that contracting was easier to do
than selling in spot markets were significantly less likely to participate in contracting. Con-
versely, those that agreed with the statement were significantly more likely to participate
in contracting.  This result suggests that perceptions about ease of contracting compared

to spot marketing, which can be construed as a transactions cost (opportunity cost on the
producer), significantly influences contracting decisions.   There is no clear reason for the

positive sign on the coe∏icienl for the PREF variable. On one hand, one might expect that
those respondents who prefer to concentrate on farming (strongly agree to the statement)
might simply contract the crop to simplify marketing decisions.  However, one might also

argue that those who prefer marketing are more inclined to spend significant time and money
searching out buyers and information, and would therefore be more likely to contract. Nei-
ther story is particularly compelling, but the results suggest that producers’ preferences for
farming versus marketing significantly influences contracting decisions.

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