Quality, reputation and price in horticultural markets

Abstract

This paper first examines the effects of quality and reputation for quality on prices of rockmelons, tomatoes and avocados on the Brisbane, Australia, wholesale produce market from November, 1982 to May, 1983. Price data were recorded for individual grower consignments and compared with overall market price averages and ranges. This examination leads to a hypothesis about quality-price relationships in which quality affects prices in three different ways. The buyer's assessment of quality relative to what is available on the market locates a product line relative to the average market price. A reputation for quality delays price changes after quality itself has changed, with price drops occurring more rapidly than price recovery. After a price drop due to quality problems, prices are erratic relative to market trends due to a reputation for unreliable quality. A detailed analysis of quality and price data for rockmelons consigned by a major grower to seven different agents on the Sydney, Australia, wholesale market in 1979, 1980 and 1981 is then used to test the hypothesis. It is concluded that these data do not refute the hypothesis and that the hypothesis provides a useful basis for quality-price investigations.