FARMERS PREFERENCES FOR CROP CONTRACTS

An empirical approach combining elements of principal-agent theory and transaction cost economics is used to determine farmers' preferences for contract terms in crop production. The approach is tested by askin g grain farmers to rank contract choices and specify price premiums in simulated case situations. The statistical results indicate that farm ers' preferences for rates of cost sharing, price premiums, and financ ing arrangements are significantly influenced by asset specialization and uncertainty associated with the case situations, and by selected b usiness and personal characteristics.