Alternative Marketing Arrangements and Cattle Prices: Insights from Hotelling’s Model

GianCarlo Moschini and T. Jake Smith

No 360825, 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO from Agricultural and Applied Economics Association

Abstract: This paper analyzes a Hotelling duopsony model with location-based price discrimination and procurement contracts pegged to the average spot-market price. This setup captures key features of US beef processors’ procurement of cattle supplies, which relies heavily on (controversial) spot-price contracts known as Alternative Marketing Arrangements. We show that use of these contracts increases the equilibrium price markdown in the market; and, as spot-price contracts become more prevalent, the markdown increases at an increasing rate. Both of these conclusions also apply to the standard case of uniform mill pricing.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 13
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea25:360825

DOI: 10.22004/ag.econ.360825

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