Assessing the Impact of Fresh Vegetable Growers’ Risk Aversion Levels and Risk Perception on the Probability of Adopting Marketing Contracts: A Bayesian Approach

One of the most frequently used arguments to explain the increased 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 utilized in this study to examine the impact of fresh vegetable producers’ personal characteristics on the probability of adopting marketing contracts. Among the characteristics examined are: risk aversion levels, risk perception, age, education, income, location. The findings indicate that age, farm size and the potential to expand the operation are parameters that affect the choice of contracts. On the other hand, the results do not support the risk shifting hypothesis.