Modeling Processor Market Power and the Incidence of Agricultural Policy: A Non-parametric Approach
This paper examines interactions between market power and agricultural policy in the U.S. wheat flour milling industry using a non-parametric approach. The analysis focuses on marketing loan and pre-1986 deficiency payment programs; farmers' payments from these programs are dependent on whether or not the market price exceeds a "policy" price. It assesses if the payments trigger a change in the underlying economic behavior of the milling industry, and any resulting change in the flour-wheat price margin. The analysis compares the outcomes of using constrained and unconstrained sliced inverse regressions in order to identify the significant factors affecting millers' pricing behavior. In both cases, the link functions are then estimated using a non-parametric regression of prices on these factors. Constraining the factors in the sliced inverse regression in order to generate coefficients that are easily interpreted using economic theory does not affect the results. Based on the SIR factors, millers were able to extract an additional $0.24/cwt. of flour by increasing their marketing margins in years farmers received program payments. Based on the CIR factors, the increase in the marketing margin was $0.23/cwt. In both cases the increase was approximately 10 percent of the estimated marketing margin in years farmers received program payments.
(This abstract was borrowed from another version of this item.)
|Date of creation:||2011|
|Contact details of provider:|| Web page: http://www.eaae.org|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- C.S. Kim & C. Hallahan & G. Schaible & G. Schluter, 2001. "Economic analysis of the changing structure of the U.S. flour milling industry," Agribusiness, John Wiley & Sons, Ltd., vol. 17(1), pages 161-171.
- B. Wade Brorsen & Jean-Paul Chavas & Warren R. Grant & L. D. Schnake, 1985. "Marketing Margins and Price Uncertainty: The Case of the U.S. Wheat Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(3), pages 521-528.
- Kyle Stiegert, 2002. "The producer, the baker, and a test of the mill price-taker," Applied Economics Letters, Taylor & Francis Journals, vol. 9(6), pages 365-368.
- Ashenfelter, Orley & Sullivan, Daniel, 1987. "Nonparametric Tests of Market Structure: An Application to the Cigarette Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 483-498, June.
When requesting a correction, please mention this item's handle: RePEc:ags:eaae11:114618. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.