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Quality Grading In The Supply Chain: The Case Of Vegetables In Southern Philippines1

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  • Digal, Larry N.
  • Hualda, Luis

Abstract

This paper examines the role of quality grades or standards in the supply chain. A model is employed which shows that quality grading provides information that lower search cost of buyers. Thus, when such standards are inadequate, information is distorted which results to asymmetric price transmission. The model is applied in the vegetable industry in Southern Philippines using primary and secondary data. A price asymmetry marketing margin model is estimated using secondary data for cabbage and onion. Results show that price transmission is symmetric for cabbage and asymmetric for onion. Asymmetry in price transmission implies that marketing information are not effectively transmitted in the food chain and that establishing quality grades or standards is necessary to improve efficiency in the supply chain.

Suggested Citation

  • Digal, Larry N. & Hualda, Luis, 2003. "Quality Grading In The Supply Chain: The Case Of Vegetables In Southern Philippines1," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57860, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare03:57860
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    File URL: http://purl.umn.edu/57860
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    References listed on IDEAS

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    1. von Cramon-Taubadel, Stephan, 1998. "Estimating Asymmetric Price Transmission with the Error Correction Representation: An application to the German Pork Market," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 25(1), pages 1-18.
    2. Purcell, Tim, 1999. "Forecasting Marketing Margins in the Australian Pig Industry," 1999 Conference (43th), January 20-22, 1999, Christchurch, New Zealand 124539, Australian Agricultural and Resource Economics Society.
    3. Severin Borenstein & A. Colin Cameron & Richard Gilbert, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 305-339.
    4. Lye, J N & Sibly, H, 1994. "Testing for Pricing Asymmetries in Customer Markets," Australian Economic Papers, Wiley Blackwell, vol. 33(63), pages 239-252, December.
    5. Concepcion, Sylvia B. & Montiflor, Marilou O., 2003. "Perceptions of Southern Mindanao Farmers On the Quality of Temperate Vegetables," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57848, Australian Agricultural and Resource Economics Society.
    6. B. Wade Brorsen & Jean-Paul Chavas & Warren R. Grant & L. D. Schnake, 1985. "Marketing Margins and Price Uncertainty: The Case of the U.S. Wheat Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(3), pages 521-528.
    7. A. M. Azzam, 1992. "Testing The Competitiveness Of Food Price Spreads," Journal of Agricultural Economics, Wiley Blackwell, vol. 43(2), pages 248-256.
    8. Stephan Cramon-Taubadel & Jens-Peter Loy, 1996. "Price Asymmetry in the International Wheat Market: Comment," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 44(3), pages 311-317, November.
    9. Daniel H. Pick & Jeffrey Karrenbrock & Hoy F. Carman, 1990. "Price asymmetry and marketing margin behavior: An example for California-Arizona citrus," Agribusiness, John Wiley & Sons, Ltd., vol. 6(1), pages 75-84.
    10. Ehrlich, Isaac & Fisher, Lawrence, 1982. "The Derived Demand for Advertising: A Theoretical and Empirical Investigation," American Economic Review, American Economic Association, vol. 72(3), pages 366-388, June.
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