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Exploring the Inside of U.S. Long-Term Hog Procurement Contracts: From a Perspective of Coordinating for Meat Quality

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  • Long-Term Contracts
  • Vertical Coordination
  • Pork Quality


The research analyzes U.S. hog procurement contract to explore factors influencing the choice of contracts over spot markets in a circumstance where product differentiation comes into play. Using existing theories of contracts, it proposes three hypotheses: incentive distortion; imperfection in price signals; and temporal specificity. Based on the analysis of a unique data set of hog procurement contracts, we found preliminary evidence supporting the hypotheses. In particular, it is confirmed that vertical coordination for difficult-to-measure quality attributes and intertemporal consistency of hog weights strongly favors long-term contracts over spot markets. We expect these findings enhance our understandings of alternative vertical coordination modes as well as the behavioral nature of quality attributes.

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