The role of contracts in viticulturee
DOI:
https://doi.org/10.1229/tecempresarialjournal.v18i2.315Keywords:
Vertical coordination, contractual relationship, quality of grape, reputationAbstract
Although economists have expended enormous effort examining the rationale for the contracts in agriculture, few studies have been undertaken in viticulture. However, in grape and wine production we observe different contractual arrangements. The underlying contractual structures are analyzed in different viticulture regions. Irrespective of the mode of vertical relationship in use between grape growers and those who process or market the grapes, we fi nd that contracts allow wineries to articulate their requirements with regard to the quality of grapes produced by growers. This analysis also allows us to conclude that contracts are a means of transferring risk and defi ning production responsibilities within a wine production system. We also observe a number of lingering theoretical issues that need to be addressed. Contracts facilitate the coordination of the relationship, but they do not ensure the long-term success. We conclude by discussing the role of reputation in contracting relationships.
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