Evaluating Reforms in Canadian Chicken Marketing Mechanisms Using a Linear-Quadratic Inventory Model
AbstractMarketing institutions in supply managed industries are evolving due to broad globalization pressures. The output and sales decisions of chicken processing firms under two different pricing mechanisms are modeled using a linear-quadratic inventory model. Decision rules lead to structural equations that relate output and sales to their own lagged values, lagged inventories and lagged prices and cost indicators. A Generalized Method of Moments (GMM) estimator is applied to the system of equations. The null hypotheses no adjustment costs in processing and no role for inventories in marketing are rejected. We simulate the impacts of reforming the chicken pricing mechanism, moving from producers vs. processors bargaining to a formula-based price (referred to as cost-plus"). Output in the industry is higher under the bargaining pricing system mostly because processors pay a lower price than under the cost-plus" mechanism. Simulations reveal that producers' expected profits are lower on average under the bargaining system than under cost-plus." Moreover, the cost-plus" system reduces the variability of profits.
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Bibliographic InfoArticle provided by De Gruyter in its journal Journal of Agricultural & Food Industrial Organization.
Volume (Year): 8 (2010)
Issue (Month): 1 (February)
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Web page: http://www.degruyter.com
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- Abdessalem Abbassi & Lota D. Tamini & Jean‐Philippe Gervais, 2012.
"Do Inventories Have an Impact on Price Transmission? Evidence From the Canadian Chicken Industry,"
John Wiley & Sons, Ltd., vol. 28(2), pages 173-186, 03.
- Abbassi, Abdessalem & Tamini, Lota D. & Gervais, Jean-Philippe, 2011. "Do inventories have an impact on price transmission? Evidence from the Canadian chicken industry," MPRA Paper 30868, University Library of Munich, Germany.
- Lambert, Remy, 2012. "A Primer on the Economics of Supply Management and Food Supply Chains," Working Papers 125246, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
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