Asymmetric Grading Error And Adverse Selection: Lemons In The California Prune Industry
Grading systems are often introduced to address the classic adverse selection problem associated with asymmetric information about product quality. However, grades are rarely measured perfectly, and adverse selection outcomes may persist due to grading error. We study the effects of errors in grading, focusing on asymmetric grading errors- namely when low-quality product can erroneously be classified as high quality, but not vice versa. In conceptual model, we show the effects of asymmetric grading errors on returns to producers. Application to the California prune industry shows that grading errors reduce incentives to produce more valuable, larger prunes.
Volume (Year): 24 (1999)
Issue (Month): 01 (July)
|Contact details of provider:|| Web page: http://waeaonline.org/|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hennessy, David A., 1996.
"Information Asymmetry As a Reason for Food Industry Vertical Integration,"
Staff General Research Papers Archive
5032, Iowa State University, Department of Economics.
- David A. Hennessy, 1996. "Information Asymmetry as a Reason for Food Industry Vertical Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 1034-1043.
- De, Sankar & Nabar, Prafulla, 1991. "Economic implications of imperfect quality certification," Economics Letters, Elsevier, vol. 37(4), pages 333-337, December.
- 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.
- Hennessy, David A. & Wahl, Thomas I., 1997. "Discount Schedules and Grower Incentives in Grain Marketing," Staff General Research Papers Archive 10672, Iowa State University, Department of Economics.
- Konstantinos Giannakas & Richard Gray & Nathalie Lavoie, 1999. "The impact of protein increments on blending revenues in the Canadian wheat industry," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 5(1), pages 121-136, February.
- Erik Lichtenberg, 1997. "The Economics of Cosmetic Pesticide Use," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 39-46.
- Hennessy, David A., 1996. "Economics of Purifying and Blending, The," Staff General Research Papers Archive 5261, Iowa State University, Department of Economics.
- Matsumoto, Masao & French, Ben C., 1971. "Empirical Determination of Optimum Quality Mix," Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 1.
- Mason, Charles F & Sterbenz, Frederic P, 1994. "Imperfect Product Testing and Market Size," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(1), pages 61-86, February.
When requesting a correction, please mention this item's handle: RePEc:ags:jlaare:30878. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.