Market Power and Farm-Retail Price Transmission: The Case of U.S. Fluid Milk Markets

Charng-Jiun Yu and Brian W. Gould

No 285887, 2018 Conference, April 16-17, 2018, Minneapolis, Minnesota from NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: In this paper we seek to understand the impact of market competitiveness on the degree of asym-metric price transmission and associated welfare implications. We estimate a kinked Almost Ideal Demand System for fluid milk products in 18 U.S. metropolitan areas. By conducting an asymmet-ric price transmission test, we find that cities with less competitive food retailing tend to exhibit asymmetric price transmission. The degree of price asymmetry and associated welfare loss are decreasing in the market competitiveness. Our welfare analysis suggests that the welfare loss due to asymmetric price transmission is large in terms of the percentage of milk expenditures. The potential is for substantially higher future welfare loss given the ongoing consolidation in food retailing industry.

Keywords: Marketing (search for similar items in EconPapers)
Date: 2018-04
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Persistent link: https://EconPapers.repec.org/RePEc:ags:n13418:285887

DOI: 10.22004/ag.econ.285887

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