Pleasures of cockaigne: Quality gaps, market structure, and the amount of grading

The article explores under what circumstances high-quality producers would not voluntarily submit to grading when low-quality firms would readily do so and under what conditions high-quality firms would have a lesser proportion of their output graded than would their low-quality counterparts. It also investigates how market structure affects the decison to grade, establishing that a competitive industry carries out the optimal amount of grading. When some firms have finite market shares, the industry engages in excessive grading.