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Wholesaler Markup Decisions Under Demand Uncertainty

  • Park, Timothy A.
  • Lohr, Luanne

We examine consistency with economic theory of markup decisions for a risk averse firm facing demand uncertainty. We derive testable comparative static results that describe the influence on the markup of expected demand, demand uncertainty, average variable costs and exogenous demand shifters. We test the model using data from the wholesale market for organic lettuce. Our results demonstrated that risk averse wholesalers raise markups as expected demand increases and reduce them as uncertainty increases.

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Paper provided by University of Georgia, Department of Agricultural and Applied Economics in its series Faculty Series with number 16699.

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Date of creation: 1996
Date of revision:
Handle: RePEc:ags:ugeofs:16699
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  1. Timothy A. Park & Luanne Lohr, 1996. "Supply and Demand Factors for Organic Produce," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 647-655.
  2. Rosenthal, Robert W., 1993. "Bargaining rules of thumb," Journal of Economic Behavior & Organization, Elsevier, vol. 22(1), pages 15-24, September.
  3. Jennifer Morgan & Bruce Barbour, 1991. "Marketing organic produce in New Jersey: Obstacles and opportunities," Agribusiness, John Wiley & Sons, Ltd., vol. 7(2), pages 143-163.
  4. R.W. Fraser, 1984. "Uncertainty and the Theory of Mark-Up Pricing," Economics Discussion / Working Papers 84-04, The University of Western Australia, Department of Economics.
  5. Rob Fraser, 1995. "An Analysis Of The Role Of Uncertainty In The Marketing Of Perishable Products," Journal of Agricultural Economics, Wiley Blackwell, vol. 46(2), pages 233-240.
  6. Hey, John D, 1983. "Whither Uncertainty?," Economic Journal, Royal Economic Society, vol. 93(369a), pages 130-39, Supplemen.
  7. Leland, Hayne E, 1972. "Theory of the Firm Facing Uncertain Demand," American Economic Review, American Economic Association, vol. 62(3), pages 278-91, June.
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