WHOLESALER MARKUP DECISIONS UNDER DEMAND UNCERTAINTY

Timothy Park and Luanne Lohr

No 96-13, Faculty Series from University of Georgia, Department of Agricultural and Applied Economics

Abstract: We examine consistency with economic theory of markup decisions for a risk averse firm facing demand uncertainty. We derive testable comparative static results that describe the influence on the markup of expected demand, demand uncertainty, average variable costs and exogenous demand shifters. We test the model using data from the wholesale market for organic lettuce. Our results demonstrated that risk averse wholesalers raise markups as expected demand increases and reduce them as uncertainty increases.

Keywords: risk aversion; marketing margins; comparative statics; organics (search for similar items in EconPapers)
Date: 1996-07
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Working Paper: WHOLESALER MARKUP DECISIONS UNDER DEMAND UNCERTAINTY (1996)
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