The Value of the Initial Payment of the Canadian Wheat Board as a Signaling Device

Abstract

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.

Price Discrimination in Russian Wheat Exports: Evidence from Firm‐level Data

“…Tamini et al . 's () simulation results indicate that the CWB is able to realise small profits by signaling higher yields than expected, considering the time span 1998/99–2003/04.…”

“…Tamini et al . () argue that the CWB has an incentive to signal greater yields than expected in order to induce foreign competitors to cut their export quantity. The CWB is able to do so because it enjoys informational advantage vis‐à‐vis private exporters.…”

The Impacts of the Canadian Wheat Board Ruling on the North American Malt Barley Markets

“…Previous studies of government sanctioned state trading enterprises (STEs) such as the CWB have mainly focused on modeling and quantifying their welfare effects and other potential distortions in trade and the efficiency of marketing services, market power, and food security. These analyses provide mixed evidence about the effects of STEs (and the CWB) on economic efficiency, standard measures of economic welfare, and benefits to stakeholders (e.g., see Veeman ; Alston et al ; Carter et al ; Alston and Gray ; Carter and Smith ; Lavoie ; McCorriston and MacLaren ; Tamini et al ). More broadly, the effects of removing long‐standing agricultural policies has been a subject of numerous studies, including those that have examined the deregulation of the Australian dairy industry, regulatory reform of New Zealand's beef and sheep sectors, and the end of tobacco production and price management in the United States (e.g., see Sureshwaran et al ; Doucouliagos and Hone ; Paul et al ; Edwards ; Brown et al ).…”

“…However, Ulrich et al (1987) argued that varietal control restricted production decisions and, among others, Carter et al (1998) provide some evidence that the CWB lobbied for varietal restrictions with respect to small grains. stakeholders (e.g., see Veeman 1987;Alston et al 1993;Carter et al 1998;Alston and Gray 2000;Carter and Smith 2001;Lavoie 2005;McCorriston and MacLaren 2006;Tamini et al 2010). More broadly, the effects of removing long-standing agricultural policies has been a subject of numerous studies, including those that have examined the deregulation of the Australian dairy industry, regulatory reform of New Zealand's beef and sheep sectors, and the end of tobacco production and price management in the United States (e.g., see Sureshwaran et al 1990;Doucouliagos and Hone 2000;Paul et al 2000;Edwards 2003;Brown et al 2007).…”

State trading deregulation and prairie durum wheat production

“…Many studies of the economic impact of the CWB were performed without data on postreform outcomes (see Alston, Carter, & Smith, ; Alston & Gray, ; Bekkerman, Schweizer, & Smith, ; Carter, Loyns, & Berwald, ; Carter & Smith, ; Furtan, Kraft, & Tyrchniewicz, ; Lavoie, ; McCorriston & MacLaren, ; Tamini, Gervais, & Larue, ; Veeman, ). In contrast to work by Furtan et al.…”