Producer Penalties and Bonuses

Producer penalties and bonuses can help reduce the incidence of side-selling and better align farmers' incentives with purchasers'.   Bonuses can help ensure that farmers take the necessary measurements to produce the quality charachteristics often present in contract farming arrangements. A randomized controlled experiement with milk producers in Vietnam showed that the presence of penalties and bonuses drove farmers to higher input use which resulted in higher quality milk.

Best practice category: 
Author (Core team): 

Christoph Saenger, Matin Qaim, and Angelino Viceisza