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Alternative approaches in detecting asymmetry in farm-retail price transmission of fluid milk

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  • Oral Capps

    (Department of Agricultural Economics, Texas A&M, University College Station, TX 77843 or aagiepolo@gmail.com)

  • Pablo Sherwell

    (Department of Agricultural Economics, Texas A&M, University College Station, TX 77843 or aagiepolo@gmail.com)

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    Abstract

    Testing for asymmetric price transmission and calculating elasticities of price transmission are important areas of research for providing insights into market efficiency issues. We analyze the behavior of tests for asymmetry according to the conventional Houck approach and to the von Cramon-Taubadel and Loy error correction model (ECM) approach. We also estimate the short-run and long-run elasticities of price transmission between the farm and retail levels of the marketing channel for whole milk and 2% milk for seven U.S. cities by model specification. We employ monthly data over the period from January 1994 to October 2002. Consistent with the extant literature, empirical results suggest that the farm-retail price transmission process for milk is asymmetric. Price transmission elasticities, in conjunction with rising farm prices, are generally larger than corresponding elasticities associated with falling farm prices, but they all are quite inelastic. [JEL Classification: Q11, Q13]. © 2007 Wiley Periodicals, Inc. Agribusiness 23: 313-331, 2007.

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    File URL: http://hdl.handle.net/10.1002/agr.20126
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

    Volume (Year): 23 (2007)
    Issue (Month): 3 ()
    Pages: 313-331

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    Handle: RePEc:wly:agribz:v:23:y:2007:i:3:p:313-331

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    Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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    1. Ping Zhang & Stanley M. Fletcher & Dale H. Carley, 1995. "Peanut price transmission asymmetry in peanut butter," Agribusiness, John Wiley & Sons, Ltd., vol. 11(1), pages 13-20.
    2. Daniel H. Pick & Jeffrey Karrenbrock & Hoy F. Carman, 1990. "Price asymmetry and marketing margin behavior: An example for California-Arizona citrus," Agribusiness, John Wiley & Sons, Ltd., vol. 6(1), pages 75-84.
    3. Frigon, Mathieu & Doyon, Maurice & Romain, Robert F.J., 1999. "Asymmetry in Farm-Retail Price Transmission in the Northeastern Fluid Milk Market," Research Reports 25220, University of Connecticut, Food Marketing Policy Center.
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      • Balke, Nathan S & Fomby, Thomas B, 1997. "Threshold Cointegration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 627-45, August.
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    Cited by:
    1. Tey, (John) Yeong-Sheng, 2009. "Symmetry in farm-retail price transmission: pork in Malaysia," MPRA Paper 16693, University Library of Munich, Germany.
    2. Loy, Jens-Peter & Holm, Thore & Steinhagen, Carsten, 2012. "Vertical Price Transmission In Differentiated Product Markets: A Disaggregated Study For Milk And Butter," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 123284, Agricultural and Applied Economics Association.
    3. Stewart, Hayden & Blayney, Donald P., 2010. "Retail Dairy Prices Fluctuate with the Farm Value of Milk," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 60947, Agricultural and Applied Economics Association.

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