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The Effect Of Contracting On Pricing Dynamics In The Fed Cattle Market: An Experimental Simulation Approach

  • Lyford, Conrad P.
  • Hicks, R. Todd
  • Ward, Clement E.
  • Trapp, James N.
  • Peel, Derrell S.

The increased amount of contracting in many agricultural markets continues to be a source of considerable controversy. Some research indicates that increased levels of contracting lead to better prices for processors/users while other research is inconclusive. This article uses an experimental economics approach to study the effects on prices of systematic variations in contracting levels using an experimental model of the fed cattle market. Using experimental economics allowed the control of contracting levels and other variables (e.g. supply levels) that are not possible using industry data. Pricing dynamics changed considerably with increased levels of contracting, but the mean price level was found to be not related to contracting levels. The response of price to a given supply was found to increase as contracting levels increase. In addition, price variability with high levels of contracting showed long periods with relatively little adjustments followed by short periods of abrupt changes.

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File URL: http://purl.umn.edu/20535
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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2001 Annual meeting, August 5-8, Chicago, IL with number 20535.

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Date of creation: 2001
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Handle: RePEc:ags:aaea01:20535
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  1. Ward, Clement E. & Koontz, Stephen R. & Schroeder, Ted C., 1998. "Impacts From Captive Supplies On Fed Cattle Transaction Prices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(02), December.
  2. Gordon, Douglas, 1984. "Performance of Thin Futures Markets: Rice and Sunflower Seed Futures," Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 4.
  3. Anderson, John D. & Ward, Clement E. & Koontz, Stephen R. & Peel, Derrell S. & Trapp, James N., 1998. "Experimental Simulation Of Public Information Impacts On Price Discovery And Marketing Efficiency In The Fed Cattle Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(01), July.
  4. repec:cup:cbooks:9780521456821 is not listed on IDEAS
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