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A General Equilibrium Theory of Contracts in Community Supported Agriculture
Author(s) -
Sproul Thomas W.,
Kropp Jaclyn D.
Publication year - 2015
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aav029
Subject(s) - anticipation (artificial intelligence) , production (economics) , yield (engineering) , work (physics) , agriculture , crop insurance , business , economics , expected utility hypothesis , microeconomics , agricultural science , agricultural economics , marketing , financial economics , ecology , biology , mechanical engineering , materials science , environmental science , artificial intelligence , computer science , engineering , metallurgy
Community Supported Agriculture (CSA) contracts allow consumers to buy claims on a farm's future production. In turn, the consumer provides working capital to the farm during the growing season. CSA contracts also provide risk management for farmers with limited access to Federal crop insurance by transferring part of the farm's risk to the consumer. We derive a theory of CSA contract pricing for the two most prevalent types of CSA contracts: yield contracts, in which consumers receive a percentage of the farm's production, and weight contracts, in which consumers receive fixed quantities. We develop a two‐period model in which expected utility maximizing producers and consumers engage in CSA contracting in the first period based on anticipation of yields and spot prices in the second period. Using the model, we generate several testable hypotheses to be explored in future research. Additionally, we present an overview of the data necessary to test the propositions and potential challenges that might arise in related empirical work.