Journal Article

Discount Schedules and Grower Incentives in Grain Marketing

David A. Hennessy and Thomas I. Wahl

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 79, issue 3, pages 888-901
Published in print August 1997 | ISSN: 0002-9092
Published online August 1997 | e-ISSN: 1467-8276 | DOI: http://dx.doi.org/10.2307/1244430
Discount Schedules and Grower Incentives in Grain Marketing

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In this paper we 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.

Keywords: cleaning; commingling; dockage schedule; incentives; quality; Q130

Journal Article.  0 words. 

Subjects: Agricultural Economics

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