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The Theory of Price Collars: The Linking of Prices in a Market Channel to Redress the Exercise of Market Power

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  • Li Tian
  • Ronald W. Cotterill

    (University of Connecticut)

Abstract

The marketing channels for many goods involve the production of a raw commodity that is processed and then distributed to retailers for sale to consumers. Either the processing industry or the retailing industry or both may exercise substantial market power ultimately against raw commodity suppliers or consumers, the disorganized (competitive) economic groups at the ends of the market channel. This paper develops a theory of price collars to regulate pricing in such a channel. Price collars link raw product, wholesale and retail prices but do not explicitly set such prices. For example, a wholesale price collar could limit the wholesale price to 140% of the raw commodity price, and a retail price collar could limit retail price to 130% of the wholesale price.

Suggested Citation

  • Li Tian & Ronald W. Cotterill, 2004. "The Theory of Price Collars: The Linking of Prices in a Market Channel to Redress the Exercise of Market Power," Food Marketing Policy Center Research Reports 091, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    • Handle: RePEc:zwi:fpcrep:091
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    File URL: http://www.cag.uconn.edu/are/zwickcenter/documents/FMPC/rr91.pdf
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    References listed on IDEAS

    as
    1. Slade, Margaret E, 1995. "Product Rivalry with Multiple Strategic Weapons: An Analysis of Price and Advertising Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 445-476, Fall.
    2. S. Chan Choi, 1991. "Price Competition in a Channel Structure with a Common Retailer," Marketing Science, INFORMS, vol. 10(4), pages 271-296.
    3. Ronald W. Cotterill, 2003. "Drafting a Connecticut Fair Milk Pricing Law: A Meeting the Competition Clause that Enhances the Competitive Position of Connecticut Processors and A Small Account Rule that Recognizes the Higher Cost," Issue Papers 38, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    4. Ronald W. Cotterill & Tirtha Pratim Dhar, 2003. "Oligopoly Pricing with Differentiated Products: The Boston Fluid Milk Market Channel," Food Marketing Policy Center Research Reports 074, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    5. Cotterill, Ronald, 2003. "Drafting a Connecticut Fair Milk Pricing Law: A Meeting the Competition Clause that Enhances the Competitive Position of Connecticut Processors and A Small Account Rule that Recognizes the Higher Cost," Issue Papers 169491, University of Connecticut, Food Marketing Policy Center.
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    Cited by:

    1. Cotterill, Ronald W., 2006. "Pricing and Policy Problems in the Northeast Fluid Milk Industry," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(2), pages 1-12, October.
    2. Ronald W. Cotterill, 2005. "Milk Pricing Matters for the Sustainability of Dairy Farmers in the Northeast," Issue Papers 48, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    3. Cotterill, Ronald, 2006. "Annotated and Expanded Minutes of the Milk Marketing Policy Meeting University of Connecticut July 18, 2006," Issue Papers 170030, University of Connecticut, Food Marketing Policy Center.
    4. Ronald W. Cotterill, 2006. "Annotated and Expanded Minutes of the Milk Marketing Policy Meeting," Issue Papers 51, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    5. Cotterill, Ronald, 2005. "Milk Pricing Matters for the Sustainability of Dairy Farmers in the Northeast," Issue Papers 169537, University of Connecticut, Food Marketing Policy Center.

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