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A Theoretical Basis for Determination of Grading and Sorting Schemes

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  • Pinhas Zusman

Abstract

The determination of grade standards and of the amount of product sorted in the market is analyzed by examining the individual quality valuation function (IQVF). The IQVF describes the behavior of the marginal rate of substitution between the product and the numeraire as a function of the product's quality characteristics and the purchased bundle of goods. The equilibrium grading and sorting schemes depend on the market structure and the configuration of the IQVF's. In a competitive market, grade boundaries coincide with the intersections of the IQVF's, which are located on the upper envelope curve of the IQVF's. The grading scheme is then economically efficient. Conditions which result in poor market performance are identified by analyzing the dynamics of the scheme adjustment process. It is suggested that government intervention in setting grade standards should be guided by information on the configuration of the IQVF's as derived from market experiments.

Suggested Citation

  • Pinhas Zusman, 1967. "A Theoretical Basis for Determination of Grading and Sorting Schemes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 49(1_Part_I), pages 89-106.
    • Handle: RePEc:oup:ajagec:v:49:y:1967:i:1_part_i:p:89-106.
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    File URL: http://hdl.handle.net/10.2307/1237070
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    Cited by:

    1. Nie, Wenjing & Li, Taiping & Zhu, Liqun, 2020. "Market demand and government regulation for quality grading system of agricultural products in China," Journal of Retailing and Consumer Services, Elsevier, vol. 56(C).
    2. Freebairn, John W., 1973. "The Value Of Information Provided By A Uniform Grading System," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 17(2), pages 1-13, August.
    3. Guijing WANG & Stanley M. FLETCHER & Dale H. CARLEY, "undated". "Determinants Of Demand For Beef: The Impact Of Fat Trimming," Department of Resource Economics Regional Research Project 95412, University of Massachusetts.
    4. Upchurch, M.L. & Trelogan, Harry C. & Caudill, C.E. & Huddleston, Harold F. & Kibler, William E. & Brooks, Emerson & Bonnen, James T. & Bryant, W. Keith, 1977. "PART IV. Agricultural Economic Information Systems," AAEA Monographs, Agricultural and Applied Economics Association, number 337224, january.
    5. Golan, Amos & Shalit, Haim, 1985. "Using Wine Quality Differential in Grapes Pricing," Working Papers 232640, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    6. Nie, Wenjing & Abler, David & Li, Taiping, 2021. "Grading attribute selection of China's grading system for agricultural products: What attributes benefit consumers more?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 93(C).
    7. Sharma, Shiva & Quilkey, John J., 1991. "Labour Quality and Farm Labour Contracts," 1991 Conference (35th), February 11-14, 1991, Armidale, Australia 146392, Australian Agricultural and Resource Economics Society.
    8. Helmberger, Peter G. & Campbell, Gerald R. & Dobson, William D., 1981. "PART IV. Organization and Performance of Agricultural Markets," AAEA Monographs, Agricultural and Applied Economics Association, number 337229, january.
    9. Spriggs, John, 1979. "Quality Choice in a Product Market," 1979 Annual Meeting, July 29-August 1, Pullman, Washington 278384, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Considine, Jennifer I. & Kerr, William A. & Smith, Gregory R. & Ulmer, S. Monica, 1986. "The Impact Of A New Grading System On The Beef Cattle Industry: The Case Of Canada," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 11(2), pages 1-11, December.
    11. Konstantinos Giannakas & Richard Gray & Nathalie Lavoie, 1999. "The impact of protein increments on blending revenues in the Canadian wheat industry," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 5(1), pages 121-136, February.
    12. Unknown, 1977. "Appendix: A Brief Review of the Literature by Subject Category; References; Epilogue," A Survey of Agricultural Economics Literature, Volume 2: Quantitative Methods in Agricultural Economics, 1940s to 1970s,, Agricultural and Applied Economics Association.
    13. Jones, Eluned & Conklin, Neilson C., 1993. "Grades and Standards: Issues for the Twenty-first Century The Role of Grades and Standards in Moving from 'Traditional' To Consumer-Oriented Agri-Markets," Food and Agricultural Marketing Issues for the 21st Century - FAMC 1993 Conference 265928, Food and Agricultural Marketing Consortium (FAMC).
    14. U. Spiegel & J. Templeman, 2004. "Segmentation Versus Integration: The Case of Non‐Homogeneous Groups," Manchester School, University of Manchester, vol. 72(1), pages 131-151, January.

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