ABSTRACT
This chapter examines food loss from a contract theory perspective. It discusses the rise of contracts in agriculture, the structure of marketing and production contracts, and their use in field crops, fruits, and vegetables. Buyers and growers of agricultural goods use contracts to reduce risk and secure marketing channels for products or locations that may not have access to spot markets. The chapter describes several contract characteristics that may result in greater food loss: fear of losing a contractual relationship leading to overplanting, high-quality standards, and small differences between quality premiums. From a grower’s point of view, marketing or production contracts are attractive because they can limit income risk. Quality standards vary greatly depending on the type of buyer and how the commodities are used by a particular buyer. The chapter also discusses how optimal contracts can be used to correct for two asymmetric information issues that cause food loss: moral hazard and adverse selection.
