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Marketing Margins, Market Power, and Price Uncertainty
Author(s) -
Schroeter John,
Azzam Azzeddine
Publication year - 1991
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 - 10.2307/1242426
Subject(s) - oligopoly , economics , market power , marginal cost , microeconomics , perfect competition , market price , industrial organization , econometrics , cournot competition , monopoly
This paper provides a conceptual and empirical framework for analyzing marketing margins in a noncompetitive food‐processing industry facing output price uncertainty. The framework allows the decomposition of observed margins into components reflecting the marginal cost of the processing industry, oligopoly/oligopsony price distortions, and an output price risk component. The empirical procedure is applied to a time series of spreads between wholesale pork prices and farm prices of market hogs. The principal finding is that, while farm/wholesale margins are more consistent with competitive performance now than they were fifteen years ago, the output price risk component persisted throughout the sample period.