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Supermarket fluid milk pricing practices in the western United States

Author

Listed:
  • Hoy F. Carman

    (Department of Agricultural and Resource Economics, University of California, One Shields Avenue, Davis, California 95616)

  • Richard J. Sexton

    (Department of Agricultural and Resource Economics, University of California, One Shields Avenue, Davis, California 95616)

Abstract

This study analyzes retail milk pricing by supermarkets and marketing margin behavior for four fluid milk products in nine large metropolitan markets in the Western United States. Multiple empirical approaches are utilized to investigate retailer pricing behavior, and, on balance, these methods provide significant evidence of noncompetitive price behavior in each of the markets. Correlations of retail price changes indicate considerable pricing independence among retailers across cities, while rankings of retail prices by milk product provide significant evidence that prices are not based primarily on costs, as would be true if pricing were competitive. Estimated retail price responses to farm price changes are consistent with monopoly pricing behavior for several of the milk products in several of the markets. [EconLit Citations: L660, L810]. © 2005 Wiley Periodicals, Inc. Agribusiness 21: 509-530, 2005.

Suggested Citation

  • Hoy F. Carman & Richard J. Sexton, 2005. "Supermarket fluid milk pricing practices in the western United States," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 509-530.
    • Handle: RePEc:wly:agribz:v:21:y:2005:i:4:p:509-530
    DOI: 10.1002/agr.20062
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    References listed on IDEAS

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    1. Ronald W. Cotterill & Tirtha Pratim Dhar, 2003. "Oligopoly Pricing with Differentiated Products: The Boston Fluid Milk Market Channel," Food Marketing Policy Center Research Reports 074, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    2. Frigon, Mathieu & Doyon, Maurice & Romain, Robert F.J., 1999. "Asymmetry in Farm-Retail Price Transmission in the Northeastern Fluid Milk Market," Research Reports 25220, University of Connecticut, Food Marketing Policy Center.
    3. Carman, Hoy F., 1998. "California Milk Marketing Margins," Journal of Food Distribution Research, Food Distribution Research Society, vol. 29(3), pages 1-6, November.
    4. Mathieu Frigon & Maurice Doyon & Robert F.J. Romain, 1999. "Asymmetry in Farm-Retail Price Transmission in the Northeastern Fluid Milk Market," Food Marketing Policy Center Research Reports 045, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    5. Azzeddine M. Azzam, 1999. "Asymmetry and Rigidity in Farm-Retail Price Transmission," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 525-533.
    6. Bettendorf, L & Verboven, F, 2000. "Incomplete Transmission of Coffee Bean Prices: Evidence from the Netherlands," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 27(1), pages 1-16, March.
    7. Sexton, Richard & Zhang, Mingxia & Chalfant, James, 2003. "Grocery Retailer Behavior in the Procurement and Sale of Perishable Fresh Produce," Contractor and Cooperator Reports 291974, United States Department of Agriculture, Economic Research Service.
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