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The Effect Of Rounding On The Probability Distribution Of Regrading In The U.S. Peanut Industry

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Author Info

  • Diaz, Edgar F. Pebe
  • Brorsen, B. Wade
  • Anderson, Kim B.
  • Richter, Francisca G.-C.
  • Kenkel, Philip L.

Abstract

This article determines the effect of rounding (pointing-off) of grade percentages to the nearest whole number on the probability distribution of regrading in the peanut industry. Results show that rounding causes graders to have to regrade an extra 4% of samples even when they follow all directions and make no mistakes. When rounding was not used, the sample weight had little effect on the probability of regrading. With rounding, the probability of regrading was reduced by beginning with a larger than 500-gram sample. Thus, rounding provides an incentive to take overweight samples in order to avoid regrading. Overweight samples can overestimate the value of peanuts. A low-cost way to improve peanut grading accuracy would be to round to tenths rather than whole numbers.

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File URL: http://purl.umn.edu/14652
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Bibliographic Info

Article provided by Agricultural Economics Association of Georgia in its journal Journal of Agribusiness.

Volume (Year): 20 (2002)
Issue (Month): 1 ()
Pages:

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Handle: RePEc:ags:jloagb:14652

Contact details of provider:
Postal: 301 Conner Hall, University of Georgia, Athens, GA 30602-7509
Web page: http://www.agecon.uga.edu/~jab/
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Related research

Keywords: grading; normal-jump distribution; peanuts; regrading; rounding; Crop Production/Industries;

References

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  1. Kyle Stiegert & B. Wade Brorsen, 1996. "The distribution of futures prices: diffusion-jump versus generalized beta-2," Applied Economics Letters, Taylor & Francis Journals, vol. 3(5), pages 303-305.
  2. Akgiray, Vedat & Booth, Geoffrey, 1986. "Stock Price Processes with Discontinuous Time Paths: An Empirical Examination," The Financial Review, Eastern Finance Association, vol. 21(2), pages 163-84, May.
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Cited by:
  1. Marcoul, Philippe & Lawrence, John D. & Hueth, Brent, 2006. "Grader Bias In Cattle Markets? Evidence From Iowa," 2006 Annual meeting, July 23-26, Long Beach, CA 21123, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Hatchett, Robert B. & Brorsen, B. Wade & Anderson, Kim B., 2009. "Optimal Length of Moving Average to Forecast Futures Basis," 2009 Conference, April 20-21, 2009, St. Louis, Missouri 53048, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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