Assessing the Impact of Fresh Vegetable Growers’ Risk Aversion Levels and Risk Preferences on the Probability of Adopting Marketing Contracts: A Bayesian Approach
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One of the most frequently cited theoretical statements to explain the use of contractual arrangements is that risk drives the choice of contracts. However, there is limited empirical support for this argument. A Bayesian ordered probit formulation is used in this study to determine the importance of fresh vegetable producers’ and farm operation characteristics on the probability of adopting marketing contracts. The findings of the study indicate that younger farmers, with larger farm size and with the ability to expand their operations are more likely to participate in marketing contract agreements. On the other hand, the results do not support the risk shifting hypothesis.