Marketing Margins, Market Power, and Price Uncertainty
This paper provides a conceptual and empirical framework for analyzing marketing margins in a noncompetitive food-processing industry facing output price uncertainty. The framework allows the decomposition of observed margins into components reflecting the marginal cost of the processing industry, oligopoly/oligopsony price distortions, and an output price risk component. The empirical procedure is applied to a time series of spreads between wholesale pork prices and farm prices of market hogs. The principal finding is that, while farm/wholesale margins are more consistent with competitive performance now than they were fifteen years ago, the output price risk component persisted throughout the sample period.
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|Date of creation:||01 Nov 1991|
|Date of revision:|
|Publication status:||Published in American Journal of Agricultural Economics, November 1991, vol. 73 no. 4, pp. 990-999|
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