The Potential Inefficiency of Using Marketing Margins in Applied Commodity Price Analysis, Forecasting, and Risk Management

Frank M. Han and Garth J. Holloway

No 285670, 1981-1999 Conference Archive from NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: This paper examines the implications of using marketing margins in applied commodity price analysis. The marketing-margin concept has a long and distinguished history, but it has caused considerable controversy. This is particularly the case in the context of analyzing the distribution of research gains in multi-stage production systems. We derive optimal tax schemes for raising revenues to finance research and promotion in a downstream market, derive the rules for efficient allocation of the funds, and compare the rules with an without the marketing-margin assumption. Applying the methodology to quarterly time series on the Australian beef-cattle sector and, with several caveats, we conclude that, during the period 1978:2 - 1988:4, the Australian Meat and Livestock Corporation optimally allocated research resources.

Keywords: Marketing (search for similar items in EconPapers)
Date: 1996-04
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nc8191:285670

DOI: 10.22004/ag.econ.285670

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