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Bargaining, Search, and Price Dispersion: Evidence from the Live Hogs Market

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  • Vukina, Tomislav
  • Zheng, Xiaoyong

Abstract

Using unique panel data on individual transactions between buyers and sellers in the spot market for live hogs, we found a large degree of intra-day price dispersion. Motivated by this empirical puzzle, we offer an explanation which is rooted in the bargaining with search theory. We formulate three hypotheses involving the role of farmers’ search cost, bargaining parties’ patience, and asymmetric information that we believe can explain the observed phenomenon. Empirical analysis shows strong support for all three of the stated theoretical predictions, indicating that the bargaining with search theory explains at least 31 percent of the observed intra-day price variation in this market.

Suggested Citation

  • Vukina, Tomislav & Zheng, Xiaoyong, 2010. "Bargaining, Search, and Price Dispersion: Evidence from the Live Hogs Market," Agricultural and Resource Economics Review, Cambridge University Press, vol. 39(3), pages 534-546, October.
    • Handle: RePEc:cup:agrerw:v:39:y:2010:i:03:p:534-546_00
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Ali Hortaçsu & Chad Syverson, 2004. "Product Differentiation, Search Costs, and Competition in the Mutual Fund Industry: A Case Study of S&P 500 Index Funds," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 403-456.
    3. MacMinn, Richard D, 1980. "Search and Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 308-327, April.
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    Cited by:

    1. Gaetano Lisi, 2013. "Can the Mortensen-Pissarides Model Match the Housing Market Facts?," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 56(2), pages 78-92.
    2. Gaetano Lisi, 2012. "Can the Mortensen-Pissarides Model Match the Housing Market Facts ?," Working Papers hal-00676072, HAL.
    3. Lisi, Gaetano, 2011. "Price dispersion in the housing market: the role of bargaining and search costs," MPRA Paper 33863, University Library of Munich, Germany.
    4. Gaetano Lisi & Mauro Iacobini, 2013. "Real estate appraisals, hedonic models and the measurement of house price dispersion," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 56(1), pages 61-73.

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