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Asymmetric response of retail milk prices in the northeast revisited

  • Daniel A. Lass

    (Department of Resource Economics, University of Massachusetts, Amherst, Massachusetts 01003)

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    Retail milk price responses to farm price changes were analyzed for Boston, Massachusetts, and Hartford, Connecticut. Prior research concluded that asymmetries did not exist in the response of retail fluid milk prices to changes in farm prices. This study finds transmission rates are greater for the Compact period (100-120%) than the pre-Compact period (66-88%). Short-run asymmetries are apparent. Retail prices respond rapidly to farm price increases, but slowly to farm price decreases. This study also finds evidence of long-run asymmetry. When equivalent farm price increases and decreases occur, retail prices do not return to the same levels that were observed before the price changes. Such long-run asymmetry was not observed in prior empirical studies of retail prices in the Northeast. [EconLit Classification: Q110, Q130, L110]. © 2005 Wiley Periodicals, Inc. Agribusiness 21: 493-508, 2005.

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    File URL: http://hdl.handle.net/10.1002/agr.20061
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    Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

    Volume (Year): 21 (2005)
    Issue (Month): 4 ()
    Pages: 493-508

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    Handle: RePEc:wly:agribz:v:21:y:2005:i:4:p:493-508
    Contact details of provider: Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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    1. Chidmi, Benaissa & Lopez, Rigoberto A. & Cotterill, Ronald W., 2004. "Retail Oligopoly Power, Dairy Compact, And Boston Milk Prices," Food Marketing Policy Center Research Reports 083, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    2. Reagan, Patricia B. & Weitzman, Martin L., 1982. "Asymmetries in price and quantity adjustments by the competitive firm," Journal of Economic Theory, Elsevier, vol. 27(2), pages 410-420, August.
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