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Sticky short‐run prices and vertical pricing: Evidence from the market for iceberg lettuce
Author(s) -
Powers Nicholas J.
Publication year - 1995
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/1520-6297(199501/02)11:1<57::aid-agr2720110107>3.0.co;2-9
Subject(s) - economics , wholesale price index , monetary economics , producer price index , iceberg , mid price , market price , point (geometry) , agricultural economics , price level , commerce , microeconomics , mathematics , sea ice , oceanography , geometry , geology
Wholesale prices of iceberg lettuce move in accord with free‐on‐board shipping point (FOB) price changes, uniformly adjusting in 1 week to rising and falling FOB prices. Retail prices, by contrast, adjust more slowly to FOB and wholesale price changes, and they respond slightly more to wholesale price increases than to decreases. Moreover, FOB and wholesale price changes often partially „pass through” retail prices, suggesting retailers stabilize their short‐run prices by absorbing FOB and wholesale price rises and not passing along these price declines. Packer—shipper efforts to stabilize weekly FOB prices for 1 month reduces estimated averages of the retail price and retail—FOB price spread in 11 of 12 cities. © 1995 by John Wiley & Sons, Inc.