Group contracts and sustainability - Experimental evidences from smallholder rice seed production

Contract farming in seed production has played a great instrumental role to bring private investment into seed research and production. Poor functioning of institutions hinders the full potential benefits of seed contracts to reach to producers. Seed producers are the most important part of the seed supply chain and thereby the present study attempt to analyze the producer's preference for group contract and its impact on welfare of actors in the seed value chain. We propose two types of group contracts, viz, contract B (company-organizer-seed producers group (SPG)) and C (company-SPG). We carried out an economic experiment using real producers and organizers of the seed contracts, where producers face a choice between an existing contract and either of proposed group contracts. The experiment consists of two treatments, i) concealed and revealed price information and ii) presence and absence of local organizer in producer sessions. We find that preference for contract B is higher than contract C and existing contract. Contract B shows higher price bargaining under the concealed price information compared to revealed treatment. We find group life of 3.78 periods and more than half of the groups (53%) survived throughout the five rounds indicating a very high sustainability