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Does Top of the Market Pricing Facilitate Oligopsony Coordination?

David Davis ()

No 12000, SDSU Working Papers in Progress from South Dakota State University, Department of Economics

Abstract: This paper suggests how a particular vertical arrangement, Top of the Market Pricing (TOMP), can have horizontal anti-competitive effects. The theory is also applicable to other vertical arrangements in use in the fed cattle market. The theory changes the theoretical backdrop for examining captive supplies. Until now, a negative correlation between prices and captive supplies was theorized to result from a reduction in bidding aggressiveness on behalf of packers. The theory presented suggests why bidders maybe less aggressively when captive supplies are high. Furthermore, it eliminates debates over the appropriate time span over which to define captive supplies and whether feedlots or packers control delivery. Delivery control and delivery timing matter in the theory above only in the respect that packers must know cattle are committed prior to price being determined. In short, this theory represents a dramatically new way to examine the theoretical consequences of captive supplies.

Keywords: Captive supply; Oligopsony; cattle markets; grid pricing (search for similar items in EconPapers)
JEL-codes: L11 L13 Q13 (search for similar items in EconPapers)
Pages: pages 9 pages
Date: 2000-08
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