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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

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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Bibliographic 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
Date of revision:
Handle: RePEc:ags:midasp:11508

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Postal: Justin S. Morrill Hall of Agriculture, 446 West Circle Dr., Rm 202, East Lansing, MI 48824-1039
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Web page: http://www.aec.msu.edu/agecon/
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Keywords: Marketing;

References

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  1. Binkley, James K. & Canning, Patrick & Dooley, Ryan & Eales, James S., 2002. "Consolidated Markets, Brand Competition, and Orange Juice Prices," Agricultural Information Bulletins 33659, United States Department of Agriculture, Economic Research Service.
  2. Aviv Nevo, 1998. "Measuring Market Power in the Ready-to-Eat Cereal Industry," NBER Working Papers 6387, National Bureau of Economic Research, Inc.
  3. Shantanu Dutta & Mark Bergen & Daniel Levy, 2002. "Price Flexibility in Channels of Distribution: Evidence from Scanner Data," Working Papers 2002-10, Bar-Ilan University, Department of Economics.
  4. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  5. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92.
  6. Roll, Richard, 1984. "Orange Juice and Weather," American Economic Review, American Economic Association, vol. 74(5), pages 861-80, December.
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Cited by:
  1. Luckstead, Jeff & Devadoss, Stephen & Mittelhammer, Ron C., 2013. "Strategic Trade Policies in the U.S. Orange Juice Market: Competition between Florida and São Paulo," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149668, Agricultural and Applied Economics Association.

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