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Beyond Illinois Brick: The Law and Economics of Cost Pass-Through in the ADM Price Fixing Case

Author

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  • Cotterill, Ronald W.
  • Egan, Leonard
  • Buckhold, William

Abstract

This article reviews the legal standards and the economics of indirect purchaser cases. Drawn from recent cases on behalf of consumers in the ADM price fixing case, it presents cost pass through models for high fructose corn syrup (HFCS), one of the alleged price fixes in the wet corn milling industry. If soft drink bottlers, a primary user of HFCS, have fixed proportion production, constant returns to scale, and if other bottlers input prices are unaffected by variations in soft drink output due to the price fix, then the impact of the price fix on bottlers' cost is equal to the increase in the price of HFCS. The extent of pass through of the increase by bottlers is shown to depend critically upon the market structure of the bottling industry and the shape of the retail demand curve. Flexible demand functional forms are needed to avoid constraining estimated pass through rates to levels above or below full, 100 percent, pass through.

Suggested Citation

  • Cotterill, Ronald W. & Egan, Leonard & Buckhold, William, 1998. "Beyond Illinois Brick: The Law and Economics of Cost Pass-Through in the ADM Price Fixing Case," Research Reports 25205, University of Connecticut, Food Marketing Policy Center.
  • Handle: RePEc:ags:uconnr:25205
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    File URL: http://purl.umn.edu/25205
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    References listed on IDEAS

    as
    1. Cotterill, Ronald W., 1998. "Estimation of Cost Pass Through to Michigan Consumers in the ADM Price Fixing Case," Research Reports 25148, University of Connecticut, Food Marketing Policy Center.
    2. repec:adr:anecst:y:1994:i:34 is not listed on IDEAS
    3. Jerry Hausman & Gregory Leonard & J. Douglas Zona, 1994. "Competitive Analysis with Differentiated Products," Annals of Economics and Statistics, GENES, issue 34, pages 143-157.
    4. repec:adr:anecst:y:1994:i:34:p:06 is not listed on IDEAS
    5. repec:adr:anecst:y:1994:i:34:p:07 is not listed on IDEAS
    6. Cotterill, Ronald W. & Franklin, Andrew W. & Ma, Li Yu, 1996. "Measuring Market Power Effects in Differentiated Product Industries: An Application to the Soft Drink Industry," Research Reports 25229, University of Connecticut, Food Marketing Policy Center.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ronald W. Cotterill, 2005. "The impact of the Northeast Dairy Compact on New England consumers: A report from the milk policy wars," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 455-471.
    2. Anna Laura Baraldi & Christian Rojas, 2011. "Cost Pass-Through with Network Externalities," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 10(3), pages 177-199, December.
    3. Ronald W. Cotterill, 2010. "Antitrust economic analysis in food marketing channels: a global perspective," Agricultural Economics, International Association of Agricultural Economists, vol. 41(s1), pages 83-91, November.
    4. Ronald W. Cotterill, 2002. "Comments on the Food Marketing Institutes’ Submission to the FTC Titled “Supermarket Merger Investigations and Remedies”," Issue Papers 27, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    5. Christian Rojas & Alexandra Andino & Wayne D. Purcell, 2008. "Retailers' response to wholesale price changes: new evidence from scanner-based quantity-weighted beef prices," Agribusiness, John Wiley & Sons, Ltd., vol. 24(1), pages 1-15.

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