Discount Schedules and Grower Incentives in Grain Marketing

14 Pages Posted: 31 Mar 2020

See all articles by David Hennessy

David Hennessy

Iowa State University

Thomas I. Wahl

Washington State University

Date Written: August 1997

Abstract

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

Suggested Citation

Hennessy, David and Wahl, Thomas I., Discount Schedules and Grower Incentives in Grain Marketing (August 1997). American Journal of Agricultural Economics, Vol. 79, Issue 3, pp. 888-901, 1997, Available at SSRN: https://ssrn.com/abstract=3563720 or http://dx.doi.org/10.2307/1244430

David Hennessy (Contact Author)

Iowa State University

Thomas I. Wahl

Washington State University

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