What is it about?
It's about using a principal-agent model to rationalize an optimal revenue sharing contract between a grape grower and a winery, when a risk-averse grower allocates production efforts to multiple production activities that differ in their impact on final tasting quality.
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Why is it important?
There are not many countries in which revenue sharing between wine grower and wine processor are used - why?
Perspectives
For higher end wines with more complexity in tasting quality profile (where the price is less closely associated with the tasting quality?), it may be a more efficient risk sharing device from the perspective of the grape grower to use bottle price contracts.
Professor Bodo E Steiner
bodo.steiner@helsinki.fi
Read the Original
This page is a summary of: Contracting in the wine supply chain with bilateral moral hazard, residual claimancy and multi-tasking, European Review of Agricultural Economics, October 2011, Oxford University Press (OUP),
DOI: 10.1093/erae/jbr054.
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