Discount Schedules and Grower Incentives in Grain Marketing

David Hennessy and Thomas Wahl

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: In this paper, the authors 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.

Date: 1997-08-01
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Published in American Journal of Agricultural Economics, August 1997, vol. 79 no. 3, pp. 888-901

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Journal Article: Discount Schedules and Grower Incentives in Grain Marketing (1997)
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