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

Listed author(s):
  • Diaz, Edgar F. Pebe
  • Brorsen, B. Wade
  • Anderson, Kim B.
  • Richter, Francisca G.-C.
  • Kenkel, Philip L.

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

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

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Handle: RePEc:ags:jloagb:14652
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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 163-184, May.
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