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The Transmission of Price Trends from Consumers to Producers and Tests of Market Power

Author

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  • Lkassbi, Driss
  • West, Gale E.
  • Clark, J. Stephen

Abstract

This study examines the competitiveness of four Canadian agricultural industries (eggs, milk, chicken and turkey) using a general equilibrium farm to retail pricing model developed by Wohlgenant (1989). The model generates retail and farm pricing equations that are estimated using maximum likelihood developed by Johansen (1992). The results indicate that in all cases, long-run constant returns is rejected, indicating market power within the Canadian retail to farm marketing sector. The model also finds more cointegrating vectors than predicted by theory, also inconsistent with competitive markets. Results are based on commercial disappearance as a proxy for consumer demand and therefore confounding between uncompetitive markets and quality differences may be indicated. Less ambiguous results would be obtained if consumer expenditures rather than commercial disappearance data were available. Still, results are rather emphatic in rejection of competitive markets in food markets in Canada. More competitive markets are indicated in the United States using similar methods.

Suggested Citation

  • Lkassbi, Driss & West, Gale E. & Clark, J. Stephen, 2008. "The Transmission of Price Trends from Consumers to Producers and Tests of Market Power," Consumer and Market Demand Network Papers 45497, University of Alberta, Department of Resource Economics and Environmental Sociology.
  • Handle: RePEc:ags:ualbnp:45497
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    References listed on IDEAS

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    1. Giancarlo Moschini, 1995. "Units of Measurement and the Stone Index in Demand System Estimation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(1), pages 63-68.
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    5. Henneberry, Shida Rastegari & Piewthongngam, Kullapapruk & Qiang, Han, 1999. "Consumer Food Safety Concerns And Fresh Produce Consumption," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(01), July.
    6. Jutta Roosen & Stéphan Marette & Sandrine Blanchemanche & Philippe Verger, 2009. "Does Health Information Matter for Modifying Consumption? A Field Experiment Measuring the Impact of Risk Information on Fish Consumption," Review of Agricultural Economics, Agricultural and Applied Economics Association, pages 2-20.
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    10. Vickner, Steven S. & Davies, Stephen P., 1999. "Estimating Market Power And Pricing Conduct In A Product-Differentiated Oligopoly: The Case Of The Domestic Spaghetti Sauce Industry," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 31(01), April.
    11. repec:ags:joaaec:v:31:y:1999:i:1:p:1-13 is not listed on IDEAS
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    More about this item

    Keywords

    Market power; food processing; cointegration; Agribusiness; Agricultural and Food Policy; Consumer/Household Economics; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety; D41; L66; Q13;

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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