The recent demand trend for specialty coffee has been fostering the organization of new relational contracts that include special attributes of quality. Based on the analysis of two contract models adopted in the coordination of the supply of specialty coffee grains in Brazil, this paper discusses which contract type is more effective for motivating the production of quality attributes. The analysis of two typical contracts (called loose and tight contracts) was based on the Incentive Theory and in the light of the experience of growers in Brazil. Among the results, it was observed that, in the case of the loose contract, despite first-best outcomes, there might be supply scarcity in the recontracting when the bonus decreases, i.e., processors may not find quality products because the decrease in growers' revenue hinders investments in quality coffee. As for the tight contract, although first-best outcomes are not implemented, growers have more incentive to produce quality coffee and thus the possibility of holdup decreases. These findings suggest that tight contracts are more efficient to impel a continuous production of quality coffee contracts over time, according to the presuppositions of New Institutional Economics.
