Discount Schedules and Grower Incentives in Grain Marketing
AbstractIn 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 InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 10672.
Date of creation: 01 Aug 1997
Date of revision:
Publication status: Published in American Journal of Agricultural Economics, August 1997, vol. 79 no. 3, pp. 888-901
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Other versions of this item:
- David A. Hennessy & Thomas I. Wahl, 1997. "Discount Schedules and Grower Incentives in Grain Marketing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 888-901.
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