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An Econometric Analysis of Price Dynamics in the Presence of a Price Floor: The Case of American Cheese

Author

Listed:
  • Chavas, Jean-Paul
  • Kim, Kwansoo

Abstract

In this paper, we present an econometric analysis of the effects of a price floor on price dynamics and price volatility. A price floor (implemented as a part of government pricing policy) provides a censoring mechanism for price determination. We specify and estimate a dynamic Tobit model under time-varying volatility. The model is applied to analyze the effects of a price support program on price dynamics and price volatility in the U.S. American cheese market. The econometric analysis provides useful insights on price dynamics in the presence of a government-determined price floor.

Suggested Citation

  • Chavas, Jean-Paul & Kim, Kwansoo, 2005. "An Econometric Analysis of Price Dynamics in the Presence of a Price Floor: The Case of American Cheese," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 37(1), pages 21-35, April.
    • Handle: RePEc:cup:jagaec:v:37:y:2005:i:01:p:21-35_00
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    Cited by:

    1. Bolotova, Yuliya V. & Novakovic, Andrew M., . "An Empirical Analysis of Wholesale Cheese Pricing Practices on the Chicago Mercantile Exchange (CME) Spot Cheese Market," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 18(3), pages 1-18.
    2. Xiaodong Du & Fengxia Dong, 2016. "Responses to market information and the impact on price volatility and trading volume: the case of Class III milk futures," Empirical Economics, Springer, vol. 50(2), pages 661-678, March.
    3. Anthony N. Rezitis & Ourania A. Tremma, 2022. "The linkage between international dairy commodity prices and volatility: a panel-GARCH analysis," Journal of Agribusiness in Developing and Emerging Economies, Emerald Group Publishing Limited, vol. 13(5), pages 685-705, April.

    More about this item

    JEL classification:

    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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