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Alternative Marketing Arrangements and Cattle Prices: Insights from Hotelling’s Model

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  • Moschini, GianCarlo
  • Smith, T. Jake

Abstract

This paper analyzes a Hotelling duopsony model with location-based price discrimination and procurement contracts pegged to the average spot-market price. This setup captures key features of US beef processors’ procurement of cattle supplies, which relies heavily on (controversial) spot-price contracts known as Alternative Marketing Arrangements. We show that use of these contracts increases the equilibrium price markdown in the market; and, as spot-price contracts become more prevalent, the markdown increases at an increasing rate. Both of these conclusions also apply to the standard case of uniform mill pricing.

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  • Moschini, GianCarlo & Smith, T. Jake, 2025. "Alternative Marketing Arrangements and Cattle Prices: Insights from Hotelling’s Model," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 360825, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea25:360825
    DOI: 10.22004/ag.econ.360825
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