OVER-ORDER PREMIUMS AND PRICE WARS IN THE MICHIGAN MILK MARKET

Duane A. Banderob and Christopher Wolf (cwolf@cornell.edu)

No 21607, 1999 Annual meeting, August 8-11, Nashville, TN from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: We examine behavior in the Michigan fluid milk market. Over-order premiums exist because fluid milk demands are inelastic. Collusion by cooperatives is required to realize these profits. In absence of collusion, the minimum prices defined by federal milk marketing orders prevails as excess fluid milk is always present. Proprietary firms in Michigan joined the fluid milk cartel because of the threat of a state marketing order. Proprietary firms profits may be increased and information gathered in the short run through price wars that result when behavior deviates from collusion.

Keywords: Demand; and; Price; Analysis (search for similar items in EconPapers)
Pages: 14
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea99:21607

DOI: 10.22004/ag.econ.21607

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