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Discount Schedules and Grower Incentives in Grain Marketing

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  • Hennessy, David A.
  • Wahl, Thomas I.

Abstract

In this paper, the authors develop a microeconomic optimization model of grain elevator cleaning and commingling decisions when the firm is faced with different discounting schedules. Using generalizations of Jensen's inequality, it is shown that a convex (concave) discount schedule encourages commingling (cleaning). However, a separate market for cleanings may qualitatively alter the optimal arrangement of grain. Wheat elevator records are studied to discern whether alternative discount schedules provide elevators with opportunities to cover the costs of rearranging grain composition. Rearrangement activities appear to be marginally profitable for some dockage levels.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 10672.

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Date of creation: 01 Aug 1997
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Publication status: Published in American Journal of Agricultural Economics, August 1997, vol. 79 no. 3, pp. 888-901
Handle: RePEc:isu:genres:10672

Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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Cited by:
  1. Yoon, Byung-Sam & Brorsen, B. Wade & Lyford, Conrad P., 2001. "Value Of Increasing Kernel Uniformity," 2001 Annual Meeting, July 8-11, 2001, Logan, Utah 36106, Western Agricultural Economics Association.
  2. Chalfant, James A. & James, Jennifer S. & Lavoie, Nathalie & Sexton, Richard J., 1999. "Asymmetric Grading Error And Adverse Selection: Lemons In The California Prune Industry," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(01), July.
  3. Richter, Francisca G.-C. & Diaz, Edgar F. Pebe & Brorsen, B. Wade & Currier, Kevin, 2003. "Using Both Sociological and Economic Incentives to Reduce Moral Hazard," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(02), August.
  4. Johnson, D. Demcey, 2005. "Sorting and Blending Under Quality Uncertainty: Application to Wheat Protein," 2005 Annual Meeting, July 6-8, 2005, San Francisco, California 36316, Western Agricultural Economics Association.
  5. Lyford, Conrad P. & Starbird, S. Andrew, 2000. "Optimal Grade Definitions For Multiple Quality Characteristics," 2000 Annual meeting, July 30-August 2, Tampa, FL 21728, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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