Date of Award

1985

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Abstract

The paper models a particular share contract (that between the refiner and growers of sugar beets in southern Alberta) within the context of the principal-agent paradigm. That is, a principal (the refiner) chooses contractual terms so as to motivate the agents (the growers) to apply that amount of variable input (fertilizer) which leaves the principal's expected utility being maximized. The central issue considered is how specific contractual terms are related to the attitudes toward risk of the individuals. In carrying through with this exercise, we examine the actual contract in order to restrict the contracts considered to a subset of those which are theoretically possible. For instance, a share contract may involve monitoring by the principal but since the actual sugar beet contract does not, we assume that the cost of monitoring outweigh the benefits; instead of trying to characterize the forces which give rise to a contract which does not involve monitoring.;Once the theoretical analysis is completed, a simulation experiment then shows how the terms of the contract and input use respond to changes in the attitudes toward risk of principal and the agents, along with adjustments in the characteristics of their subjective probability distributions.

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