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Bargaining, Search, and Price Dispersion: Evidence from the Live Hogs Market

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  • Vukina, Tomislav
  • Zheng, Xiaoyong
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    Abstract

    Using unique panel data on individual transactions between buyers and sellers in the spot market for live hogs, we found a large degree of intra-day price dispersion. Motivated by this empirical puzzle, we offer an explanation which is rooted in the bargaining with search theory. We formulate three hypotheses involving the role of farmers’ search cost, bargaining parties’ patience, and asymmetric information that we believe can explain the observed phenomenon. Empirical analysis shows strong support for all three of the stated theoretical predictions, indicating that the bargaining with search theory explains at least 31 percent of the observed intra-day price variation in this market.

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    File URL: http://purl.umn.edu/95603
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    Bibliographic Info

    Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

    Volume (Year): 39 (2010)
    Issue (Month): 3 (October)
    Pages:

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    Handle: RePEc:ags:arerjl:95603

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    Web page: http://www.narea.org/
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    Related research

    Keywords: intra-day price dispersion; bargaining theory; search cost; asymmetric information; Demand and Price Analysis;

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    Cited by:
    1. Lisi, Gaetano, 2012. "Can the Mortensen-Pissarides model match the housing market facts?," MPRA Paper 36769, University Library of Munich, Germany.

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