Contract evolution and institutional innovation: Marketing Pacific-grown apples from 1890 to 1930

Between 1890 and 1930, the development of refrigerated rail transportation enabled a national U.S. apple industry to emerge. Apples were shipped over long distances, and sold in the terminal market on consignment or FOB, or in the auction market. There were frequent disputes over quality, caused by the long distances between buyers and sellers, the natural decline in apple quality over time, and because farmer and railroad moral hazard could accelerate quality deterioration. By 1930, apple transactions relied on government quality standards and inspection services. Evidence suggests that these institutions emerged in response to contract-enforcement and quality problems.