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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

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    1. S. Chan Choi, 1991. "Price Competition in a Channel Structure with a Common Retailer," Marketing Science, INFORMS, vol. 10(4), pages 271-296.
    2. 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.
    3. 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.
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