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Game theory application to Fed Cattle procurement in an experimental market
Author(s) -
Carlberg Jared G.,
Hogan Robert J.,
Ward Clement E.
Publication year - 2009
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/agr.20181
Subject(s) - econlit , collusion , market power , procurement , economics , consolidation (business) , microeconomics , market data , market structure , market concentration , limiting , industrial organization , marketing , business , law , finance , political science , mechanical engineering , accounting , medline , monopoly , engineering
Consolidation in meatpacking has elicited many market power concerns and studies. A noncooperative, infinitely repeated game theory model was developed and an empirical model estimated to measure beef packing firm behavior in cattle procurement. Experimental market data from three semester‐long classes using the Fed Cattle Market Simulator (FCMS) were used. Collusive behavior was found for all three data periods though the extent of collusion varied across semester‐long data periods. Results may have been influenced by market conditions imposed on the experimental market in two of the three semesters. One was a marketing agreement between the largest packer and two feedlots and the other involved limiting the amount and type of public market information available to participants. Findings underscore the need for applying game theory to real‐world transaction‐level, fed cattle market data. [EconLit Citations: C730, L100]. © 2009 Wiley Periodicals, Inc.