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Price Behavior in a Dynamic Oligopsony: Washington Processing Potatoes

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  • Timothy J. Richards
  • Paul M. Patterson
  • Ram N. Acharya
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    Abstract

    Punishment strategies are necessary to sustain a collusive oligopsony in a repeated game context when demand is uncertain and only market variables are observable. This article proposes a test for tacit collusion among potato processors in Washington state using a dynamic regime-switching model estimated with a finite mixture method. The results support the existence of punishment and collusive regimes and show the welfare losses due to anti-competitive behavior on the part of processors to be significant. Processors' oligopsony power is enhanced by higher domestic production, imports, and existing stocks, but it is ameliorated by high capacity utilization rates and exports. Copyright 2001, Oxford University Press.

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    Bibliographic Info

    Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

    Volume (Year): 83 (2001)
    Issue (Month): 2 ()
    Pages: 259-271

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    Handle: RePEc:oup:ajagec:v:83:y:2001:i:2:p:259-271

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    Cited by:
    1. Tiffin, J. Richard, 2006. "Dynamic Strategic Behaviour in the Deregulated England and Wales Liquid Milk Market," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25282, International Association of Agricultural Economists.
    2. Natalya Y. Shelkova, 2008. "Low-wage labor markets amd the power of suggestion," Working Papers 1112, Princeton University, Department of Economics, Industrial Relations Section..
    3. Hueth, Brent & Ligon, Ethan & Dimitri, Carolyn, 2007. "AJAE Appendix: Agricultural Contracts: Data and Research Needs," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 89(5), December.
    4. Zhang, Mingxia & Sexton, Richard J. & Alston, Julian M., 1999. "Does Branded Food Product Advertising Help Or Hurt Farmers?," 1999 Annual meeting, August 8-11, Nashville, TN 21582, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Dimitri, Carolyn & Jaenicke, Edward C., 2001. "Cash Market Or Contract? How Technology And Consumer Demand Influence The Decision," 2001 Annual meeting, August 5-8, Chicago, IL 20723, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Jared G. Carlberg & Robert J. Hogan & Clement E. Ward, 2009. "Game theory application to Fed Cattle procurement in an experimental market," Agribusiness, John Wiley & Sons, Ltd., vol. 25(1), pages 56-69.
    7. Ani L. Katchova & Ian M. Sheldon & Mario J. Miranda, 2005. "A dynamic model of oligopoly and oligopsony in the U.S. potato-processing industry," Agribusiness, John Wiley & Sons, Ltd., vol. 21(3), pages 409-428.

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