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Information asymmetry: the case of cattle supply transaction in Brazil

Gustavo Magalhães de Oliveira (Center for Organization Studies (CORS), School of Economics, Business Administration and Accounting (FEA/USP), University of São Paulo, São Paulo, Brazil)
Christiano França da Cunha (Faculty of Science Applied (FCA), University of Campinas (UNICAMP), Limeira, São Paulo, Brazil)
Silvia Morales De Queiroz Caleman (School of Business Administration – Federal University of Mato Grosso do Sul (ESAN/UFMS), Campo Grande, Mato Grosso do Sul, Brazil)
Roberta Luiza Gomes Maia (School of Business Administration – Federal University of Mato Grosso do Sul (ESAN/UFMS), Campo Grande, Mato Grosso do Sul, Brazil)

British Food Journal

ISSN: 0007-070X

Article publication date: 17 June 2019

Issue publication date: 9 July 2019

466

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

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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