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Political Market Power Reflected in Milk Pricing Regulations
Author(s) -
Ahn ByeongIl,
Sumner Daniel A.
Publication year - 2009
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.1467-8276.2009.01261.x
Subject(s) - cartel , monopoly , market power , economics , politics , yield (engineering) , power (physics) , government (linguistics) , microeconomics , price discrimination , market economy , business , collusion , law , linguistics , philosophy , materials science , physics , quantum mechanics , political science , metallurgy
Abstract We investigate revealed political market power reflected in the pattern of price discrimination by end use that is the hallmark of U.S. milk marketing orders. We show that the pattern of prices that would maximize producer profits, if producers operated a cartel with monopoly power in a regional market, is far above actual government‐set price differentials between milk used for fluid products and that used for manufactured products. The pattern of actual price differentials is consistent with political welfare weights for producers relative to consumers that are small compared to the weights that would yield maximum producer profits.