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Formation and adaptation of reference prices in grain marketing: An experimental study

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  • Mattos, Fabio
  • Poirier, Jamie

Abstract

This study examines formation and adaptation of reference prices by Manitoban grain producers. Research shows that preferences are reference‐dependent and marketing decisions are affected by reference prices. Results suggest that Manitoban producers’ reference prices are formed primarily by an average of recent prices and the highest price to‐date in the marketing window. Reference prices are found to adapt in the same direction as market prices, with adaptation to increasing prices being larger than adaptation to decreasing prices. When deciding to sell grain, producers are more likely to sell when they expect prices to decrease over the next month and when their reference price adjusts downwards towards the current price.

Suggested Citation

  • Mattos, Fabio & Poirier, Jamie, 2013. "Formation and adaptation of reference prices in grain marketing: An experimental study," Working Papers 148591, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
  • Handle: RePEc:ags:spaawp:148591
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    References listed on IDEAS

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    More about this item

    Keywords

    grain marketing; reference prices; Agribusiness; Crop Production/Industries; Institutional and Behavioral Economics; Risk and Uncertainty; C93; D03; D81; Q13;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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