Discount Schedules and Grower Incentives in Grain Marketing

David Hennessy and Thomas Wahl

American Journal of Agricultural Economics, 1997, vol. 79, issue 3, 888-901

Abstract: In this paper we 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. Copyright 1997, Oxford University Press.

Date: 1997
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