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Price Discrimination in the Context of Vertical Differentiation: An Application to Canadian Wheat Exports
Author(s) -
Lavoie Nathalie
Publication year - 2005
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2005.00773.x
Subject(s) - product differentiation , context (archaeology) , market power , economics , price discrimination , exploit , quality (philosophy) , product (mathematics) , microeconomics , industrial organization , biology , computer science , paleontology , monopoly , philosophy , geometry , computer security , mathematics , epistemology , cournot competition
The ability of the Canadian Wheat Board (CWB) to price discriminate in wheat exports is examined. The conceptual model shows that the CWB's ability to exploit cost differences in pricing depends on the extent of differentiation between Canadian and U.S. wheat. This model is implemented using monthly confidential price data for exports to four markets from 1982 to 1994. The empirical results support the conclusions that (1) the CWB has market power emerging from product differentiation, (2) the CWB price discriminates across export markets, and (3) Alchian—Allen effects are important in pricing in markets valuing quality such as Japan and the United Kingdom.