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Discount Schedules and Grower Incentives in Grain Marketing

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  • Hennessy, David A.
  • Wahl, Thomas I.

Abstract

In this paper, the authors develop a microeconomic optimization model of grain elevator cleaning and commingling decisions when the firm is faced with different discounting schedules. Using generalizations of Jensen's inequality, it is shown that a convex (concave) discount schedule encourages commingling (cleaning). However, a separate market for cleanings may qualitatively alter the optimal arrangement of grain. Wheat elevator records are studied to discern whether alternative discount schedules provide elevators with opportunities to cover the costs of rearranging grain composition. Rearrangement activities appear to be marginally profitable for some dockage levels.

Suggested Citation

  • 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.
  • Handle: RePEc:isu:genres:10672
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    Cited by:

    1. Chalfant, James A. & James, Jennifer S. & Lavoie, Nathalie & Sexton, Richard J., 1999. "Asymmetric Grading Error And Adverse Selection: Lemons In The California Prune Industry," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(01), July.
    2. Richter, Francisca G.-C. & Diaz, Edgar F. Pebe & Brorsen, B. Wade & Currier, Kevin, 2003. "Using Both Sociological and Economic Incentives to Reduce Moral Hazard," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(02), August.
    3. Johnson, D. Demcey, 2005. "Sorting and Blending Under Quality Uncertainty: Application to Wheat Protein," 2005 Annual Meeting, July 6-8, 2005, San Francisco, California 36316, Western Agricultural Economics Association.
    4. Ruiqing Miao & David A. Hennessy, 2015. "Optimal Protein Segregation Strategies for Wheat Growers," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 63(3), pages 309-331, September.
    5. Yoon, Byung-Sam & Brorsen, B. Wade & Lyford, Conrad P., 2002. "Value Of Increasing Kernel Uniformity," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(02), December.
    6. Lyford, Conrad P. & Starbird, S. Andrew, 2000. "Optimal Grade Definitions For Multiple Quality Characteristics," 2000 Annual meeting, July 30-August 2, Tampa, FL 21728, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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