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Abstract
We examine contracts used in the North American sugarbeet industry. Though
quite similar in many respects, the contracts we study vary across processing firms in the
set of quality measures used to condition contract payments to growers. This is somewhat
surprising given the homogeneous nature of the processors’ finished product (refined
sugar). It seems unlikely that processors differ significantly in how they value the various
attributes of a sugarbeet, and this is perhaps the most natural reason to expect differences
in the structure of quality incentives across processors. Previous attempts to explain the
observed variation in sugarbeet contracts have focused on differences in organizational
form across firms. In this paper, we provide an alternative explanation that relies on
variation across production regions in growers’ ability to ‘control’ the relevant measures
of sugarbeet quality.