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