Quality and Grading Risk

18 Pages Posted: 6 Mar 2011

See all articles by Ethan A. Ligon

Ethan A. Ligon

University of California, Berkeley; Giannini Foundation

Date Written: April 18, 2001

Abstract

Processors, packer-shippers, integrators, and a variety of third-parties engage in a wide variety of different kinds of grading, intended to summarize quality characteristics of different kinds of foodstuffs. There are two ways in which these grading characteristics may be imperfect. First, they may fail to perfectly capture the variation in quality experienced by the eventual consumer; or second, may fail to perfectly reflect investments made by the producer to improve quality. Either (or both) of these kinds of imperfections has implications for prices, investments, consumer welfare, and contracts between producers and intermediary firms. In this chapter we explore possible consequences of imperfect grading, with selected illustrations for a variety of different commodities.

Suggested Citation

Ligon, Ethan A., Quality and Grading Risk (April 18, 2001). Available at SSRN: https://ssrn.com/abstract=1776776 or http://dx.doi.org/10.2139/ssrn.1776776

Ethan A. Ligon (Contact Author)

University of California, Berkeley ( email )

207 Giannini Hall #3310
Berkeley, CA 94720-3310
United States

Giannini Foundation

UC Davis
Davis, CA 95616
United States

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