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The Value of the Initial Payment of the Canadian Wheat Board as a Signaling Device
Author(s) -
Tamini Lota D.,
Gervais JeanPhilippe,
Larue Bruno
Publication year - 2010
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aap012
Subject(s) - competitor analysis , payment , incentive , business , value (mathematics) , complete information , signaling game , microeconomics , commerce , industrial organization , economics , marketing , finance , mathematics , statistics
This paper analyzes the role of the initial payment used by the Canadian Wheat Board (CWB) in the determination of export prices and sales under the assumption that the CWB has better information about realized yields in Canada than its US competitor. In the separating equilibrium of the game, the initial payment of the CWB is larger than the initial payment under complete information. There exists an incentive under incomplete information to send a signal that realized yields are greater than expected to induce a reduction in the sales of foreign competitors. We illustrate the strategic value of the initial payment for Canadian wheat producers using a numerical simulation.