Business Commons^™

Grading Error Reduces Grower Incentive To Increase Prune Quality, Jennifer S. James, James A. Chalfant, Nathalie Lavoie, Richard J. Sexton

Jennifer S. James

Grading is important to ensure the production of high-quality foods, but It Is usually done with error, distorting market signals and diminishing Incentives to produce high-quality products. Size is the main quality criterion for dried prunes and the crucial characteristic In determining prune value. We studied the economic effects of errors In commodity grading, focusing In particular on the Implications of one-way (asymmetric) grading errors, namely when small, low quality product Is erroneously classified as high quality, but not vice versa. In an application to the California prune Industry, we estimated the extent to which large prunes are undervalued and …