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Quality improvement through consumer sorting and disposal

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  • Peyton Ferrier

    (United States Department of Agriculture, Economic Research Service, Washington, DC)

Abstract

Sorting allows consumers to capture the value of quality differences. As higher quality goods are removed, the value of the seller's remaining stock falls, lowering the price and profits. Bundling and other marketing mechanisms can discourage sorting and prevent the depreciation of the seller's stock. With comparative statics and simulations, the author shows that sellers can increase expected quality and profits by committing to discard a proportion of their resale stock after sorting occurs. In this manner, sorting acts similarly to agricultural grading. [EconLit Classification: Q1, Q11, Q13, L0, L1, D8, D82]. © 2009 Wiley Periodicals, Inc.

Suggested Citation

  • Peyton Ferrier, 2009. "Quality improvement through consumer sorting and disposal," Agribusiness, John Wiley & Sons, Ltd., vol. 25(4), pages 534-549.
  • Handle: RePEc:wly:agribz:v:25:y:2009:i:4:p:534-549
    DOI: 10.1002/agr.20223
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    File URL: http://hdl.handle.net/10.1002/agr.20223
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    References listed on IDEAS

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    1. Barzel, Yoram, 1977. "Some Fallacies in the Interpretation of Information Costs," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 291-307, October.
    2. Ferrier Peyton M, 2007. "Cherry Picking: Should Sellers Let Buyers Sort?," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(1), pages 1-32, December.
    3. Stivers, Andrew E., 2006. "Optimal number of standards under economies of scope in quality," Economics Letters, Elsevier, vol. 90(3), pages 368-372, March.
    4. Buzby, Jean C. & Wells, Hodan Farah & Axtman, Bruce & Mickey, Jana, 2009. "Supermarket Loss Estimates for Fresh Fruit, Vegetables, Meat, Poultry, and Seafood and Their Use in the ERS Loss-Adjusted Food Availability Data," Economic Information Bulletin 58313, United States Department of Agriculture, Economic Research Service.
    5. Kantor, Linda Scott & Lipton, Kathryn & Manchester, Alden & Oliveira, Victor, 1997. "Estimating and Addressing America's Food Losses," Food Review: The Magazine of Food Economics, United States Department of Agriculture, Economic Research Service, vol. 20(1).
    6. Leffler, Keith B & Rucker, Randal R, 1991. "Transactions Costs and the Efficient Organization of Production: A Study of Timber-Harvesting Contracts," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1060-1087, October.
    7. Borcherding, Thomas E & Silberberg, Eugene, 1978. "Shipping the Good Apples Out: The Alchian and Allen Theorem Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 131-138, February.
    8. Joseph E. Stiglitz, 2002. "Information and the Change in the Paradigm in Economics," American Economic Review, American Economic Association, vol. 92(3), pages 460-501, June.
    9. Peck, Joann & Childers, Terry L, 2003. " Individual Differences in Haptic Information Processing: The "Need for Touch" Scale," Journal of Consumer Research, Oxford University Press, vol. 30(3), pages 430-442, December.
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