Wholesaler Markup Decisions Under Demand Uncertainty
AbstractWe 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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Bibliographic InfoPaper provided by University of Georgia, Department of Agricultural and Applied Economics in its series Faculty Series with number 16699.
Date of creation: 1996
Date of revision:
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More information through EDIRC
risk aversion; marketing margins; comparative statics; organics; Demand and Price Analysis; Risk and Uncertainty;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Rosenthal, Robert W., 1993.
"Bargaining rules of thumb,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 22(1), pages 15-24, September.
- Hey, John D, 1983. "Whither Uncertainty?," Economic Journal, Royal Economic Society, vol. 93(369a), pages 130-39, Supplemen.
- 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.
- 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.
- Leland, Hayne E, 1972. "Theory of the Firm Facing Uncertain Demand," American Economic Review, American Economic Association, vol. 62(3), pages 278-91, June.
- 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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