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Wholesaler Markup Decisions Under Demand Uncertainty

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Author Info

  • Park, Timothy A.
  • Lohr, Luanne

Abstract

We examine consistency with economic theory of markup decisions for a risk averse firm facing demand uncertainty. We derive testable comparative static results that describe the influence on the markup of expected demand, demand uncertainty, average variable costs and exogenous demand shifters. We test the model using data from the wholesale market for organic lettuce. Our results demonstrated that risk averse wholesalers raise markups as expected demand increases and reduce them as uncertainty increases.

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File URL: http://purl.umn.edu/16699
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Bibliographic Info

Paper provided by University of Georgia, Department of Agricultural and Applied Economics in its series Faculty Series with number 16699.

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Date of creation: 1996
Date of revision:
Handle: RePEc:ags:ugeofs:16699

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Phone: (706) 542-2481
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Web page: http://www.caes.uga.edu/departments/agecon/index.html
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Related research

Keywords: risk aversion; marketing margins; comparative statics; organics; Demand and Price Analysis; Risk and Uncertainty;

References

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  1. Fraser, Robert W, 1985. "Uncertainty and the Theory of Mark-up Pricing," Bulletin of Economic Research, Wiley Blackwell, vol. 37(1), pages 55-64, January.
  2. Robert W. Rosenthal, 1992. "Bargaining Rules of Thumb," Papers 0033, Boston University - Industry Studies Programme.
  3. Timothy A. Park & Luanne Lohr, 1996. "Supply and Demand Factors for Organic Produce," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 647-655.
  4. Jennifer Morgan & Bruce Barbour, 1991. "Marketing organic produce in New Jersey: Obstacles and opportunities," Agribusiness, John Wiley & Sons, Ltd., vol. 7(2), pages 143-163.
  5. Leland, Hayne E, 1972. "Theory of the Firm Facing Uncertain Demand," American Economic Review, American Economic Association, vol. 62(3), pages 278-91, June.
  6. Hey, John D, 1983. "Whither Uncertainty?," Economic Journal, Royal Economic Society, vol. 93(369a), pages 130-39, Supplemen.
  7. Rob Fraser, 1995. "An Analysis Of The Role Of Uncertainty In The Marketing Of Perishable Products," Journal of Agricultural Economics, Wiley Blackwell, vol. 46(2), pages 233-240.
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Cited by:
  1. Markus Pasche, 1997. "Markup Pricing and Demand Uncertainty," Working Paper Series B 1997-08, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät, revised 01 Jun 1998.

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