Asymmetric farm-retail price transmission and market power: a new test

Ram Acharya, Henry Kinnucan and Steven B Caudill

Applied Economics, 2011, vol. 43, issue 30, 4759-4768

Abstract: A finite mixture model is used to estimate farm-retail price transmission in the US fresh strawberry market. Results suggest two distinct pricing regimes associated with off- and peak-harvesting seasons. The market power parameter is significant in the peak-harvest regime, but not in the off-peak regime. Moreover, price changes are transmitted completely throughout the marketing channel in the off-peak regime when the market power parameter is zero, but not in the peak-harvest regime when the market power parameter is positive. This suggests that produce buyers are more apt to exercise market power when farm supplies are abundant than when they are scarce, and that the exercise of such power causes the farm-retail price linkage to become asymmetric.

Date: 2011
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DOI: 10.1080/00036846.2010.498355

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