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Discarding Low Quality Produce with an Elastic Demand

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  • David W. Price

Abstract

The first inclination of economists is to believe that culling produce with an elastic demand will decrease total returns. This ignores the effect that culling has on quality. If the increase in quality causes price to increase by a sufficient amount, total returns increase. Furthermore, there is an optimal culling rate with respect to maximum returns. This rate is a function of the increase in price due to culling and the elasticity of demand. Since the firm faces a more elastic demand than the industry, its optimal rate of culling is less than the industry's. By using their monopoly power in setting culling rates, institutions such as marketing orders have the potential for increasing returns to industries facing elastic demand curves.

Suggested Citation

  • David W. Price, 1967. "Discarding Low Quality Produce with an Elastic Demand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 49(3), pages 622-632.
    • Handle: RePEc:oup:ajagec:v:49:y:1967:i:3:p:622-632.
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    File URL: http://hdl.handle.net/10.2307/1236897
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    Citations

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    Cited by:

    1. Sarah Jansen & William Foster & Gustavo Anríquez & Jorge Ortega, 2021. "Understanding Farm-Level Incentives within the Bioeconomy Framework: Prices, Product Quality, Losses, and Bio-Based Alternatives," Sustainability, MDPI, vol. 13(2), pages 1-21, January.
    2. Epperson, James E. & Huang, Wan-Tran, 1992. "The Potential For Intraseasonal Market Flow Management Of Southeastern Sweet Potatoes," Journal of Food Distribution Research, Food Distribution Research Society, vol. 23(2), pages 1-8, June.
    3. Mixon, Bobby & Turner, Steven C. & Centner, Terence J., 1990. "An Empirical Analysis Of A Marketing Order Referendum For A Specialty Crop," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 15(1), pages 1-7, July.
    4. Jesse, Edward V., 1979. "Social Welfare Implications of Federal Marketing Orders for Fruits and Vegetables," Technical Bulletins 157853, United States Department of Agriculture, Economic Research Service.
    5. Jesse, Edward V., 1981. "Producer Revenue Effects of Federal Marketing Order Quality Standards," Staff Reports 321773, United States Department of Agriculture, Economic Research Service.
    6. Epperson, James E. & Huang, Wan-Tran, 1994. "The Potential For Supply Management Of Southeastern Sweet Onions," Journal of Food Distribution Research, Food Distribution Research Society, vol. 25(2), pages 1-7, September.
    7. Tomek, William G. & Robinson, Kenneth L., 1977. "PART V. Agricultural Price Analysis and Outlook," AAEA Monographs, Agricultural and Applied Economics Association, number 337217, january.
    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. VanSickle, John J. & Alvarado, Guillermo E., 1983. "Florida Tomato Market Order Restrictions - An Analysis Of Their Effects And Implementation," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 15(1), pages 1-6, July.

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