Wholesaler Markup Decisions Under Demand Uncertainty
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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- 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.
- 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.
- Rosenthal, Robert W., 1993.
"Bargaining rules of thumb,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 22(1), pages 15-24, September.
- Hey, John D, 1983. "Whither Uncertainty?," Economic Journal, Royal Economic Society, vol. 93(369a), pages 130-39, Supplemen.
- Leland, Hayne E, 1972. "Theory of the Firm Facing Uncertain Demand," American Economic Review, American Economic Association, vol. 62(3), pages 278-91, June.
- 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.
- Fraser, Robert W, 1985. "Uncertainty and the Theory of Mark-up Pricing," Bulletin of Economic Research, Wiley Blackwell, vol. 37(1), pages 55-64, January.
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