Information asymmetry: the case of cattle supply transaction in Brazil

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.

Social capital, power and information sharing – evidence from the Dutch meat processing industry

“…A high dependence asymmetry is likely to be important in the food industry (e.g. de Oliveira et al , 2019), although many studies seem to have overlooked the role of power in information sharing. This study was aimed at filling these gaps by investigating the interplay of power, different social capital dimensions and information sharing within the food sector.…”

“…A high dependency asymmetry may be detrimental to information sharing (cf. de Oliveira et al , 2019), while powerful companies could impose on supply chain partners which information is required (e.g. Vijayasarathy, 2010; Yigitbasioglu, 2010).…”

Governance structures in cooperative slaughterhouses: a study on the chain of differentiated beef in the state of Paraná

“…Although the performance of Brazilian livestock has been satisfactory, studies show coordination problems, especially when considering the asymmetry of information between agents, compromising competitiveness in this Agro-Industrial System (AGS) (Caleman et al, 2008;Caleman & Zylbersztajn, 2012;Macedo, 2015;Oliveira et al, 2019;Saab et al, 2009). In addition to coordination failures, rural producers tend to face barriers involving production scale, standardization, and costs, which affect their permanence in the market (Farina, 2002;Hooks et al, 2017;Shanoyan et al, 2019).…”

Especificidade de ativos e estruturas de governança na bovinocultura de corte no Paraná.

“…De acordo com Caleman e Zylbersztajn (2010), a cadeia da pecuária bovina de corte é marcada por ausência de coordenação e desconfiança. As falhas de coordenação e desconfiança são agravadas ao se considerar a assimetria de informações (OLIVEIRA et al, 2019) e o comportamento oportunista presente nas relações pautadas por atitudes meramente comerciais, sem comprometimento, entre os segmentos que constituem o todo na cadeia da carne bovina (BARCELLOS et al, 2004;FERREIRA;PADULA, 2002), além da não remuneração ao produtor pelos investimentos em qualidade (VIANA; SILVEIRA, 2007; CALEMAN; ZYLBERSZTAJN, 2012).…”