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Economic Analysis of the U.S. Fluid Milk Industry

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  • Cai, Xiaowei
  • Stiegert, Kyle W.
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    Abstract

    In the literature, mixed results have been obtained from the studies that have examined the market power of dairy cooperatives and processors. As the main objective of the present work, we intend to find further empirical evidence to investigate whether the dairy cooperatives’ oligopoly power that is implicit in the dynamic pricing games exists and how it influences the beverage milk margins from 1983 to 2012. We studied three regional markets: California, New York and Wisconsin. In all regions, we found clear evidence of alternating high- and low-margin regimes during the study years which indicates slight departures from perfect competition in the U.S. fluid milk market. But the levels of departure vary across different states.

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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington with number 124939.

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    Date of creation: 06 Jun 2012
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    Handle: RePEc:ags:aaea12:124939

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    Related research

    Keywords: Dairy Cooperatives; Fluid Milk; Margins; Milk Marketing Order; Agribusiness; Q13; Q18; L13; L20;

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    1. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
    2. Thomas L. Cox & Jean-Paul Chavas, 2001. "An Interregional Analysis of Price Discrimination and Domestic Policy Reform in the U.S. Dairy Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 89-106.
    3. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
    4. Hayley H. Chouinard & David E. Davis & Jeffrey T. LaFrance & Jeffrey M. Perloff, 2010. "Milk Marketing Order Winners and Losers," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(1), pages 59-76.
    5. Dilip Abreu & David Pearce & Ennio Stacchetti, 1997. "Optimal Cartel Equilibria with Imperfect monitoring," Levine's Working Paper Archive 632, David K. Levine.
    6. Metin Cakir & Joseph V. Balagtas, 2012. "Estimating Market Power of U.S. Dairy Cooperatives in the Fluid Milk Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(3), pages 647-658.
    7. Xiaowei Cai & Kyle Stiegert & Stephen Koontz, 2011. "Regime switching and oligopsony power: the case of U.S. beef processing," Agricultural Economics, International Association of Agricultural Economists, vol. 42(1), pages 99-109, 01.
    8. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796.
    9. Prasertsri, Peerapon & Kilmer, Richard L., 2008. "The Bargaining Strength of a Milk Marketing Cooperative," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(2), October.
    10. Pierre R. Mérel, 2009. "Measuring market power in the French Comté cheese market," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 36(1), pages 31-51, March.
    11. Liu, Donald J. & Sun, Chin-Hwa & Kaiser, Harry M., 1995. "Market Conduct Under Government Price Intervention In The U.S. Dairy Industry," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(02), December.
    12. Vardges Hovhannisyan & Brian W. Gould, 2012. "A Structural Model of the Analysis of Retail Market Power: The Case of Fluid Milk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(1), pages 67-79.
    13. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1986. "Optimal cartel equilibria with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 39(1), pages 251-269, June.
    14. Ollinger, Michael & Nguyen, Sang V. & Blayney, Donald P. & Chambers, William & Nelson, Kenneth B., 2005. "Structural Change in the Meat, Poultry, Dairy and Grain Processing Industries," Economic Research Report 7217, United States Department of Agriculture, Economic Research Service.
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