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Marketing Margins, Market Power, and Price Uncertainty

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  • John Schroeter
  • Azzeddine Azzam

Abstract

This paper provides a conceptual and empirical framework for analyzing marketing margins in a noncompetitive food-processing industry facing output price uncertainty. The framework allows the decomposition of observed margins into components reflecting the marginal cost of the processing industry, oligopoly/oligopsony price distortions, and an output price risk component. The empirical procedure is applied to a time series of spreads between wholesale pork prices and farm prices of market hogs. The principal finding is that, while farm/wholesale margins are more consistent with competitive performance now than they were fifteen years ago, the output price risk component persisted throughout the sample period.

Suggested Citation

  • John Schroeter & Azzeddine Azzam, 1991. "Marketing Margins, Market Power, and Price Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 990-999.
  • Handle: RePEc:oup:ajagec:v:73:y:1991:i:4:p:990-999.
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