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Integrating Marginal Cost into Pricing-to-market Models for U.S. Agricultural Products

Author

Listed:
  • Saghaian, Sayed H.
  • Reed, Michael R.

Abstract

This article investigates the markup pricing behaviour of U.S. exporters of agricultural products. Agricultural products studied are feed, flour, frozen potatoes, frozen orange juice, five categories of beef, five categories of pork, and two categories of chicken. The popular pricing-to-market (PTM) approach of Krugman (1987) is used to examine market power and imperfect competition for the markets under study. The PTM model can directly investigate whether there is any evidence of market power in international trade.The sensitivity of U.S. export prices to exchange rate fluctuations may indicate price discrimination and imperfect competition in the international markets. The PTM approach is popular because of its relatively simple specification and empirical testing.

Suggested Citation

  • Saghaian, Sayed H. & Reed, Michael R., 2004. "Integrating Marginal Cost into Pricing-to-market Models for U.S. Agricultural Products," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 05.
  • Handle: RePEc:ags:cafric:45984
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    File URL: http://purl.umn.edu/45984
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    References listed on IDEAS

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    1. Kasa, Kenneth, 1992. "Adjustment costs and pricing-to-market theory and evidence," Journal of International Economics, Elsevier, vol. 32(1-2), pages 1-30, February.
    2. Knetter, Michael M, 1989. "Price Discrimination by U.S. and German Exporters," American Economic Review, American Economic Association, vol. 79(1), pages 198-210, March.
    3. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    4. Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
    5. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November.
    6. Gil-Pareja, Salvador, 2002. "Export Price Discrimination in Europe and Exchange Rates," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 299-312, May.
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    Citations

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    Cited by:

    1. Imre Ferto & Jeremias Mate Balogh, 2016. "Are the major European wine exporters able to price discriminate across their EU extra wine export destinations?," IEHAS Discussion Papers 1624, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    2. Zhang, Qiang & Reed, Michael R. & Saghaian, Sayed H., 2007. "Export Market Pricing Decisions and Market Power in World Grain Markets: A Duopoly Model for Soybeans," 2007 Annual Meeting, February 4-7, 2007, Mobile, Alabama 34949, Southern Agricultural Economics Association.

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