The role of time preferences in contract breach:Evidence from Chinese poultry farmers participating in contract farming

Farmers’contract breach behavior is cited as one of the major stumbling blocks in the sustainable expansion of contract farming in many developing countries.This paper examines farmers’contract breach decisions from the perspective of time preferences.The empirical analysis is based on a household survey and economic field experiments of poultry households participating in contract farming conducted in Jiangsu Province,China.A discounted utility model and a maximum likelihood technique are applied to estimate farmers’time preferences and the effect of time preferences on contract breach in the production and sales phases are explored with a bivariate probit model.The results show that,on average,the poultry farmers in the sample are generally present biased and impatient regarding future utility.The regression results show that farmers with a higher preference for the present and a higher discount rate are more likely to breach contracts,and time preferences play a greater role in the production phase than in the sales phase.When considering heterogeneity,specific investments and transaction costs promote contract stability only for farmers with a low degree of impatience.Moreover,compared with large-scale farmers,small-scale farmers’contract breach decisions are more significantly affected by their time preferences.These results have implications for contract stability policies and other issues that are impacted by the linking of behavioral preferences to agricultural decisions.

The Effect of the Interaction between Price and Time Preference on Cigarette Consumption among Pregnant Women

In this study,I explore smoking behavior among pregnant U.S.women using the 1979 cohort of the National Longitudinal Survey of Youth.The key aspect of this study is the availability of smoking participation data before and during pregnancy.I consider the probabilities of smoking cessation while pregnant as the outcome.I find that pregnant women who smoke are less responsive to price changes when they are more future-oriented.Women who are more present-oriented are more likely to smoke and consume more cigarettes given that they smoke more than those who are future-oriented.Moreover,those who discount the future more heavily are more sensitive to the money price of cigarettes than those who are more future-oriented.I focus on the role of time preference and the interaction between time preference and price in determining these outcomes.