Packer Self Production in the Swine Industry
نویسنده
چکیده
An analytical model is developed to explain the increasing tendency of pork packers to produce their own hogs, based on Grossman and Hart’s property rights theory of the firm. Packer upstream integration is linked to the need to align packer-producer investment incentives in an environment marked by increasing hog buyer consolidation, changing consumer demands, moves toward traceability in the food system, and heterogeneity in producer farm size and management skills. An important brake on integration is that it takes away producers’ residual rights of control over upstream assets, thereby lowering their incentive to make non-contractible cost-saving and quality-enhancing investments.
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