Political Market Power Reflected in Milk Pricing Regulations

Byeong-Il Ahn and Daniel Sumner

American Journal of Agricultural Economics, 2007, vol. 91, issue 3, 723-737

Abstract: We investigate revealed political market power reflected in the pattern of price discrimination by end use that is the hallmark of U.S. milk marketing orders. We show that the pattern of prices that would maximize producer profits, if producers operated a cartel with monopoly power in a regional market, is far above actual government-set price differentials between milk used for fluid products and that used for manufactured products. The pattern of actual price differentials is consistent with political welfare weights for producers relative to consumers that are small compared to the weights that would yield maximum producer profits. Copyright 2007, Oxford University Press.

Date: 2007
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