@article{Wilson:23617,
      recid = {23617},
      author = {Wilson, William W. and Maxwell, Brett J. and Dahl, Bruce  L.},
      title = {INCENTIVE CONTRACTS TO MEET FUNCTIONAL CHARACTERISTICS IN  WHEAT PURCHASING},
      address = {2004},
      number = {1187-2016-93676},
      series = {Agribusiness & Applied Economics Report No. 545},
      pages = {21},
      year = {2004},
      abstract = {Consistency of functional characteristics in hard red  spring (HRS) wheat is a concern confronting sellers and  buyers.  This research analyzes contract incentives for  importers with respect to cost and potential risk of  acceptance.  A principal-agent framework is utilized to  examine contract incentives.  In the principal-agent  contract, the principal offers the contract, the agent  rejects or accepts the contract, and then decides how much  effort to apply.  All this is subject to risk for the agent  and moral hazard for the principal.  An example is  presented, for which equilibrium contract terms are a base  price of 454 cents per bushel for low quality wheat and a  premium of 36 cents per bushel if high quality is achieved.   The premium for high quality is unchanged as the agent's  outside option increases, but increases as the probability  of conformance with high effort declines or as the agent's  cost of high effort increases.  Small changes in several of  the parameter values (agent's outside option, agent's cost  of high/low effort, principal value for high/low effort,  and principal's outside options if the contract was not  extended or if the agent rejects the contract) result in  the principal not offering a contract.},
      url = {http://ageconsearch.umn.edu/record/23617},
      doi = {https://doi.org/10.22004/ag.econ.23617},
}