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Retailers' response to wholesale price changes: new evidence from scanner-based quantity-weighted beef prices

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  • Christian Rojas

    (Department of Resource Economics, University of Massachusetts-Amherst, Amherst, MA 01003)

  • Alexandra Andino

    (Department of Agricultural and Applied Economics, Virginia Tech, Blacksburg, VA 24061)

  • Wayne D. Purcell

    (Department of Agricultural and Applied Economics, Virginia Tech, Blacksburg, VA 24061)

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    Abstract

    Retailers are often criticized for a slow response in retail prices to changes in wholesale beef prices. The unresponsiveness, especially when wholesale and farm prices are declining, is seen as a lack of competitiveness and as a reason for congressional action to regulate behavior of processors or retailers. The validity of the historical analyses of retailer price responsiveness is questionable, however. Traditional Bureau of Labor Statistics (BLS) retail beef prices biased upward and do not account for large volumes sold at discounted prices. This article uses newly available scanner-based quantity-weighted retail prices to suggest that retailers' response to changes in wholesale beef prices is significantly larger and possibly quicker than is shown by traditional BLS measures of retail prices. Recent efforts to prompt legislation to regulate how firms behave along the beef supply chain, which are based only on arguments that retailers are not responding to price changes at the wholesale level, may be inappropriate. [L110, L660, D400] © 2008 Wiley Periodicals, Inc.

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    File URL: http://hdl.handle.net/10.1002/agr.20143
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    Bibliographic Info

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

    Volume (Year): 24 (2008)
    Issue (Month): 1 ()
    Pages: 1-15

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    Handle: RePEc:wly:agribz:v:24:y:2008:i:1:p:1-15

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

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    1. Brent R. Moulton, 1996. "Bias in the Consumer Price Index: What Is the Evidence?," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 159-177, Fall.
    2. Lutkepohl, Helmut & Reimers, Hans-Eggert, 1992. "Impulse response analysis of cointegrated systems," Journal of Economic Dynamics and Control, Elsevier, vol. 16(1), pages 53-78, January.
    3. Jerry Hausman & Ephraim Leibtag, 2004. "CPI Bias from Supercenters: Does the BLS Know that Wal-Mart Exists?," NBER Working Papers 10712, National Bureau of Economic Research, Inc.
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    7. Barry K. Goodwin & Matthew T. Holt, 1999. "Price Transmission and Asymmetric Adjustment in the U.S. Beef Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 630-637.
    8. Christine Lensing & Wayne D. Purcell, 2006. "Impact of Mandatory Price Reporting Requirements on Level, Variability, and Elasticity Parameter Estimations for Retail Beef Prices," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(2), pages 229-239.
    9. Leonard I. Nakamura, 1998. "The retail revolution and food-price mismeasurement," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 3-14.
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    Cited by:
    1. Peter Berck & Ephraim Leibtag & Alex Solis & Sofia Villas-Boas, 2009. "Patterns of Pass-through of Commodity Price Shocks to Retail Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1456-1461.
    2. Taylor, Mykel R. & Tonsor, Glynn T., 2013. "Revealed Demand for Country-of-Origin Labeling of Meat in the United States," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 38(2), August.

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