Estimating a Theoretical Contract Curve between Vertical Stages in the Illinois Grain Industry

E. Dean Baldwin and Lowell D. Hill

American Journal of Agricultural Economics, 1975, vol. 57, issue 1, 74-82

Abstract: The impact of technological change and the corresponding elevator pricing policy is analyzed for an aggregated corn industry. A set of theoretical and empirical profit and cost functions are estimated and are used to illustrate that the competing sectors are not presently on the presumed contract curve and are not maximizing joint industry profits. The analysis suggests alternative pricing policies and resulting market structure patterns which will simultaneously increase profits for all competing sectors and will minimize total industry costs. Differences in characteristics of the grain industry suggest that alternative sets of market structure patterns and pricing policies may develop.

Date: 1975
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