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Asymmetric Price Transmission in Food Supply Chains: Impulse Response Analysis by Local Projections Applied to U.S. Broiler and Pork Prices
Author(s) -
Kuiper W. Erno,
Lansink Alfons G.J.M. Oude
Publication year - 2013
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.21338
Subject(s) - margin (machine learning) , impulse (physics) , supply chain , economics , broiler , econometrics , microeconomics , business , industrial organization , computer science , food science , marketing , chemistry , physics , quantum mechanics , machine learning
ABSTRACT In this article, the author's set out Jordà's (2005) method of local projections by which nonlinear/ asymmetric impulse responses can be computed without the need to specify and estimate the underlying nonlinear/asymmetric dynamic system. The method is used to compute price‐reaction functions that show how the prices of the different stages in a food supply chain dynamically respond to each other and whether or not these responses reveal any asymmetric patterns. Empirical applications for the U.S. pork‐meat and broiler‐composite chains illustrate the convenience of the method and reveal that in the pork chain asymmetric price transmission enables retailers (wholesalers) to increase their marketing margin vis‐à‐vis the wholesalers (farmers), whereas in the broiler sector the retailers face both temporary decreases and increases in their marketing margin as a consequence of asymmetric wholesale‐retail price transmission.