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SIMULATING THE IMPACTS OF CONTRACT SUPPLIES IN A SPOT MARKET-CONTRACT MARKET EQUILIBRIUM SETTING

Edward Jaenicke and Yanguo Wang

No 20313, 2004 Annual meeting, August 1-4, Denver, CO from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: This paper embeds a principal-agent model of producer-processor equilibrium within a market equilibrium model of contract and cash markets to analyze the impact of contracting on the spot market for hogs. The principal-agent model incorporates both quality differentiation in the contract market and an endogenously determined cash market price to account for processor-producer relationships in equilibrium. For five types of contracting scenarios, market equilibrium conditions are derived, and results are presented for a numerical example. Contrary to previous results, the paper finds that the increased supply of hogs under typical formula-price contracts can increase the cash market price and reduce its variance.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 28
Date: 2004
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Journal Article: Simulating the Impacts of Contract Supplies in a Spot Market-Contract Market Equilibrium Setting (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea04:20313

DOI: 10.22004/ag.econ.20313

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