Committed Procurement in Privately Negotiated Markets: Evidence from Laboratory Markets

Darlington M. Sabasi, Christopher T. Bastian, Dale J. Menkhaus and Owen R. Phillips

American Journal of Agricultural Economics, 2013, vol. 95, issue 5, 1122-1135

Abstract: Previous research suggests an increase in committed procurement can result in lower cash market prices for livestock. There is a paucity of research that ascertains prices received by market agents trading in a prior bargaining session via alternative marketing arrangements versus those who have not. We use laboratory market experiments to analyze the potential impacts of committed procurement on privately negotiated transactions when some traders have two windows of negotiation and others have one. Results illustrate that those who do not engage in prior trading are at a bargaining disadvantage due to matching and inventory loss risks. Copyright 2013, Oxford University Press.

Date: 2013
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