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The Value of Third-Party Certification of Preconditioning Claims at Iowa Feeder Cattle Auctions

Published online by Cambridge University Press:  28 April 2015

Harun Bulut  and
John D. Lawrence
Harun Bulut
Affiliation:
Department of Economics at Iowa State University, Ames, IA
John D. Lawrence
Affiliation:
Department of Economics at Iowa State University, Ames, IA
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Abstract

After controlling a variety of feeder cattle characteristics and market and sale conditions in Iowa feeder auctions, the price premiums for preconditioning claims (vaccinations and minimum 30 days of weaning) with and without third-party certification (TPC) are estimated as $6.12/cwt and $3.35/cwt, respectively. These premiums differ statistically (p < 0.0001), and their difference exceeds the average participation cost of TPC ($l/cwt). This indicates that TPC is valued in the market to credibly signal preconditioning investment under asymmetric information.

Keywords

asymmetric informationfeeder cattle auctionsqualitysignallingthird-party certificationQUQ12Q13C23
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 39 , Issue 3 , December 2007 , pp. 625 - 640
Copyright
Copyright © Southern Agricultural Economics Association 2007

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