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Abstract
This paper examines the role of quality grades or standards in the supply
chain. A model is employed which shows that quality grading provides
information that lower search cost of buyers. Thus, when such standards
are inadequate, information is distorted which results to asymmetric price
transmission. The model is applied in the vegetable industry in Southern
Philippines using primary and secondary data. A price asymmetry
marketing margin model is estimated using secondary data for cabbage and
onion. Results show that price transmission is symmetric for cabbage and
asymmetric for onion. Asymmetry in price transmission implies that
marketing information are not effectively transmitted in the food chain and
that establishing quality grades or standards is necessary to improve
efficiency in the supply chain.