Hilgardia
Hilgardia
Hilgardia
University of California
Hilgardia

Grading error reduces grower incentives to increase prune quality

Authors

James A. Chalfant
Jennifer S. James
Nathalie Lavoie
Richard J. Sexton

Authors Affiliations

J.A. Chalfant is Professors, Department of Agricultural and Resource Economics, UC Davis, and members of the Giannini Foundation of Agricultural Economics; J.S. James was graduate students, Department of Agricultural and Resource Economics, UC Davis. James is Assistant Professor, Department of Agricultural Economics, Pennsylvania State University, and Lavoie is Assistant Professor, Department of Resource Economics, University of Massachusetts. The sorting and grading of the authors of this article is alphabetical, and senior authorship is not assigned. The authors are grateful to Greg Thompson of the Prune Bargaining Association for assistance throughout the evolution of this project; N. Lavoiz was graduate students, Department of Agricultural and Resource Economics, UC Davis. James is Assistant Professor, Department of Agricultural Economics, Pennsylvania State University, and Lavoie is Assistant Professor, Department of Resource Economics, University of Massachusetts. The sorting and grading of the authors of this article is alphabetical, and senior authorship is not assigned. The authors are grateful to Greg Thompson of the Prune Bargaining Association for assistance throughout the evolution of this project; R.J. Sexton is Professors, Department of Agricultural and Resource Economics, UC Davis, and members of the Giannini Foundation of Agricultural Economics.

Publication Information

Hilgardia 54(6):66-71. DOI:10.3733/ca.v054n06p66. November 2000.

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Abstract

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.

References

Chalfant JA, James JS, Lavoie N, Sexton RJ. Asymmetric grading error and adverse selection: Lemons in the California prune industry. J Agric Res Econ 1999. 24pp.57-79.

Chalfant J, James J, Lavoie N, Sexton R. 2000. Grading error reduces grower incentives to increase prune quality. Hilgardia 54(6):66-71. DOI:10.3733/ca.v054n06p66
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