Fair Pricing Mechanics

Ronald Cotterill

No 170035, Issue Papers from University of Connecticut, Food Marketing Policy Center

Abstract: General Concept: Let’s look at a 200% price collar, that is the retail price can be no more than twice the raw fluid price paid to farmers. (Mass. Bill) Assume: The retail price is $3.00 and the raw price is $1.00 per gallon (near today’s situation). To comply, the channel firms can: 1) Cut the retail price to $2.00. Note: This leaves them $1.00 margin. 2) Raise the farm price to $1.50 by paying a 50¢ over order premium (O.O.P.) Note: This leaves them $1.50 margin. Conclusion: Under this policy processors and retailers will raise raw price by paying over-order premiums.

Keywords: Agricultural and Food Policy; Demand and Price Analysis (search for similar items in EconPapers)
Pages: 5
Date: 2003-03
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ucofmi:170035

DOI: 10.22004/ag.econ.170035

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