Grading error reduces grower incentives to increase prune quality
Grading is important to ensure the production of high-quality foods, but it is usually done with error, distorting market signals and diminishing incentives to produce high-quality products. Size is the main quality criterion for dried prunes and the crucial characteristic...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
University of California Agriculture and Natural Resources
2000-11-01
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| Series: | California Agriculture |
| Online Access: | http://calag.ucanr.edu/archive/?article=ca.v054n06p66 |
| Summary: | Grading is important to ensure the production of high-quality foods, but it is usually
done with error, distorting market signals and diminishing incentives to produce high-quality
products. Size is the main quality criterion for dried prunes and the crucial characteristic
in determining prune value. We studied the economic effects of errors in commodity
grading, focusing in particular on the implications of one-way (asymmetric) grading
errors, namely when small, low-quality product is erroneously classified as high quality,
but not vice versa. In an application to the California prune industry, we estimated
the extent to which large prunes are undervalued and small prunes are overvalued.
We conclude that grading error means that prunes graded as high-quality may not really
be high-quality prunes. The presence of these incorrectly graded prunes depresses
the prices that growers are paid for high-quality prunes and increases the net returns
for small prunes. As a result, growers face reduced incentives to produce larger prunes. |
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| ISSN: | 0008-0845 2160-8091 |