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Markup Pricing in a Dynamic Model of the Food Industry
Author(s) -
Heien Dale M.
Publication year - 1980
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 - 10.2307/1239467
Subject(s) - markup language , economics , econometrics , production (economics) , scale (ratio) , granger causality , causality (physics) , microeconomics , computer science , xml , physics , quantum mechanics , operating system
This paper presents a dynamic model of farm and retail prices and quantities. Central to the model is the notion that increases in wholesale prices are transmitted to the retail level via markup‐type pricing behavior. This behavior is shown to be consistent with firm optimization under the assumption of constant returns to scale and Leontief production technology at the retail level. The markup hypothesis is tested using the Granger‐Sims causality tests. Markup‐type price relationships are then estimated for twenty‐two food commodities.