Transaction Costs in Vertical Integration Contracts for Poultry Production from Farmers’ Perspective in Rio Verde (Goias, Brazil)

This study aimed to analyze the contractual relationship between processing industry in Rio Verde (Goias, Brazil) and farmers, using a Transaction Cost Economics (TCE) approach to describe relevant aspects of producers’ perception of dependence to the contracting processor. We considered the two classical analytic categories: (a) behavioral assumptions (bounded rationality and opportunism) and (b) attributes of transactions (asset specificity, frequency and uncertainty). Our findings are based on a survey with 40 farmers providing poultry to the contracting processor. Key findings are that changes in the structure of governance that manages the transaction between poultry producers and processors are efficient responses to the growth of specificity due to dedicated assets. For farmers, there is lack of information about contract content. This may enable opportunistic behavior of contracting processor. We conclude that farmers’ dependence to processors is high on specialized small-scale farms and low for more diversified and larger farms.

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Conference Paper/ Presentation
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JEL Codes:
L1; Q13

 Record created 2017-04-01, last modified 2018-01-23

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