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Game theory application to Fed Cattle procurement in an experimental market

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  • Jared G. Carlberg

    (University of Manitoba, Winnipeg, MB, Canada R3T 2R3, Canada)

  • Robert J. Hogan

    (Texas A & M University, Fort Stockton, TX 79735)

  • Clement E. Ward

    (Oklahoma State University, Stillwater, OK 74078)

Abstract

Consolidation in meatpacking has elicited many market power concerns and studies. A noncooperative, infinitely repeated game theory model was developed and an empirical model estimated to measure beef packing firm behavior in cattle procurement. Experimental market data from three semester-long classes using the Fed Cattle Market Simulator (FCMS) were used. Collusive behavior was found for all three data periods though the extent of collusion varied across semester-long data periods. Results may have been influenced by market conditions imposed on the experimental market in two of the three semesters. One was a marketing agreement between the largest packer and two feedlots and the other involved limiting the amount and type of public market information available to participants. Findings underscore the need for applying game theory to real-world transaction-level, fed cattle market data. [EconLit Citations: C730, L100]. © 2009 Wiley Periodicals, Inc.

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File URL: http://hdl.handle.net/10.1002/agr.20181
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Bibliographic Info

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

Volume (Year): 25 (2009)
Issue (Month): 1 ()
Pages: 56-69

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Handle: RePEc:wly:agribz:v:25:y:2009:i:1:p:56-69

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

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  1. Friedman,Daniel & Sunder,Shyam, 1994. "Experimental Methods," Cambridge Books, Cambridge University Press, number 9780521456821, April.
  2. Ward, Clement E., 2002. "A Review of Causes for and Consequences of Economic Concentration in the U.S. Meatpacking Industry," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 03.
  3. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
  4. Weninger, Quinn & Hunnicutt, Lynn, 1999. "Testing for Market Power in Beef Packing: Where Are We and What's Next?," Staff General Research Papers 10575, Iowa State University, Department of Economics.
  5. Schroeter, John R, 1988. "Estimating the Degree of Market Power in the Beef Packing Industry," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 158-62, February.
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  8. Van Eenoo, Edward, Jr. & Peterson, Everett B. & Purcell, Wayne D., 2000. "Impact Of Exports On The U.S. Beef Industry," 2000 Conference, April 17-18 2000, Chicago, Illinois 18923, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  9. Ward, Clement E., 2005. "Price Discovery and Pricing Choice Under Divergent Supply Scenarios in an Experimental Market for Fed Cattle," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 30(03), December.
  10. Anderson, John D. & Ward, Clement E. & Koontz, Stephen R. & Peel, Derrell S. & Trapp, James N., 1998. "Experimental Simulation Of Public Information Impacts On Price Discovery And Marketing Efficiency In The Fed Cattle Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(01), July.
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  12. John M. Marsh, 2003. "Impacts of Declining U.S. Retail Beef Demand on Farm-Level Beef Prices and Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 902-913.
  13. Plott, Charles R, 1982. "Industrial Organization Theory and Experimental Economics," Journal of Economic Literature, American Economic Association, vol. 20(4), pages 1485-1527, December.
  14. Schroeter, John R. & Azzam, Azzeddine M., 1991. "Marketing Margins, Market Power, and Price Uncertainty," Staff General Research Papers 11110, Iowa State University, Department of Economics.
  15. Richard J. Sexton, 2000. "Industrialization and Consolidation in the U.S. Food Sector: Implications for Competition and Welfare," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(5), pages 1087-1104.
  16. Stephen R. Koontz, 1999. "Marketing Agreement Impacts in an Experimental Market for Fed Cattle," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(2), pages 347-358.
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