BMK 201 Chapter Notes - Chapter 1: Tunxis Community College, Transaction Cost, Market Risk
6 Jan 2021
School
Department
Course
Professor
Document Summary
Act of coordinating activities between middlemen along the marketing channel. The longer the food marketing channel, the more difficult it become to relay information from the consumer to the farmer. Prices can serve as signals of information. Price, as an information carrier, can be a mix of signals. Some of the product attributes are experience attributes, which are only observed. If farmers are not rewarded for producing a better quality commodity, they will not take costs actions of producing such a commodity after exchange has taken place. Grid pricing process by which price paid for a commodity unit is based on the quality characteristics of that commodity unit. Supply and demand conditions determine the base price. Premiums and discounts are assigned to a commodity based on the value of processors placed on different qualities. Farmers rewarded by producing a better quality commodity, and they will take costly actions to produce more if the value exceeds cost.
