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Market Power and Supply Shocks: Evidence from the Orange Juice Market

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Author Info
Wang, Honglin
Xiang, Qing
Reardon, Thomas

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Abstract

The orange juice market is a “weather market” because of its high geographical concentration and the natural characteristics of orange trees. A few hours of a freeze in Florida is enough to cause a supply shock to the orange juice market. How do oligopolistic firms react to supply shocks – do they become more collusive or more competitive? This paper empirically examines the proposition and finds that the level of market power of orange juice firms decreases significantly, and the market becomes more competitive during supply shocks even though prices rise.

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File URL: http://purl.umn.edu/11508
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Publisher Info
Paper provided by Michigan State University, Department of Agricultural, Food, and Resource Economics in its series Staff Papers with number 11508.

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Date of creation: 2006
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Handle: RePEc:ags:midasp:11508

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Keywords: Marketing;

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  1. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92. [Downloadable!] (restricted)
  2. Roll, Richard, 1984. "Orange Juice and Weather," American Economic Review, American Economic Association, vol. 74(5), pages 861-80, December. [Downloadable!] (restricted)
  3. Binkley, James & Canning, Patrick & Dooley, Ryan & Eales, James, 2002. "Consolidated Markets, Brand Competition, and Orange Juice Prices," Agricultural Information Bulletins 33659, United States Department of Agriculture, Economic Research Service. [Downloadable!]
  4. Dutta, Shantanu & Bergen, Mark & Levy, Daniel, 2002. "Price flexibility in channels of distribution: Evidence from scanner data," Journal of Economic Dynamics and Control, Elsevier, vol. 26(11), pages 1845-1900, September. [Downloadable!] (restricted)
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  5. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July. [Downloadable!] (restricted)
  6. Aviv Nevo, 1998. "Measuring Market Power in the Ready-to-Eat Cereal Industry," NBER Working Papers 6387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Robert H. Porter, 1983. "A Study of Cartel Stability: The Joint Executive Committee, 1880-1886," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 301-314, Autumn. [Downloadable!] (restricted)
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