Premium
Notes on farm‐retail price transmission and marketing margin behavior
Author(s) -
Kinnucan Henry W.,
Zhang Dengjun
Publication year - 2015
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/agec.12188
Subject(s) - margin (machine learning) , economics , price elasticity of demand , price elasticity of supply , production (economics) , microeconomics , demand curve , factor price , marketing , business , computer science , machine learning
Perfect farm‐retail price transmission sometimes is taken to mean an elasticity of price transmission (EPT) equal to 1. We show that this definition is inconsistent with Gardner's (1975) model. We also show that the absolute marketing margin (defined as the difference between the retail price and farm price) responds differently to shifts in retail demand, input supply, and technical change in the marketers’ production function than does the relative marketing margin (defined as the ratio of the retail price to the farm price). The empirical implications of these results are discussed in some detail.