Information asymmetry: the case of cattle supply transaction in Brazil
ISSN: 0007-070X
Article publication date: 17 June 2019
Issue publication date: 9 July 2019
Abstract
Purpose
The purpose of this paper is to investigate information asymmetry in cattle supply transaction in Brazil. While the literature traditionally explores the seller’s information asymmetry advantages, the authors, in turn, draw attention to buyer’s role. This paper aims to show what farmer characteristics present negative correlation with slaughterhouses’ information asymmetry advantages. By slaughterhouses’ advantages, the authors refer to slaughterhouses’ opportunistic appropriation of value due to hidden information, such as quality measurement and remuneration of difficult-to-measure attributes. In doing so, this paper addresses the following research question: what are the farmer’s characteristics with negative correlation with slaughterhouses’ information asymmetry advantages?
Design/methodology/approach
This paper employs a logit model regression on a survey of 89 Brazilian cattle breeders. Drawing on transaction cost economics, this study empirically evaluates farmers’ technology level, level of education, family tradition, farm size and efforts to collect price information, to test which of these characteristics present negative correlation with slaughterhouses’ information asymmetry advantages.
Findings
The results illustrate that the cattle breeders’ level of education is negatively correlated with buyers’ information asymmetry advantages. Additionally, the authors find a controversial result presenting efforts to collect price information as positively correlated with this kind of information asymmetry advantages. Farmer’s farm size, family tradition and the level of technology were not influential. These findings suggest that a possible value appropriation from buyers’ information asymmetry is a problem for several types of producers, even varying size, family tradition in the activity or transaction costs to collect price information (e.g. lack of transparency). Initiatives should try to reduce this problem to these farmers to avoid value appropriation resulting from information asymmetry problems, especially in the lack of transparency.
Originality/value
This paper adopts a survey about information asymmetry in cattle supply transactions in Brazil, which is well known as one of the most relevant producer and consumer of meat. The main contribution is to shed light on the understanding of buyers’ information asymmetry advantages in farmer-slaughterhouse transactions to avoid potential conflicts. Given some singularities of the Brazilian cattle industry, the authors can empirically test buyers’, not sellers’, information asymmetry advantages.
Keywords
Citation
Oliveira, G.M.d., Cunha, C.F.d., Caleman, S.M.D.Q. and Maia, R.L.G. (2019), "Information asymmetry: the case of cattle supply transaction in Brazil", British Food Journal, Vol. 121 No. 8, pp. 1825-1837. https://doi.org/10.1108/BFJ-01-2019-0041
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited