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Supermarket fluid milk pricing practices in the western United States

Author

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  • Hoy F. Carman

    (Department of Agricultural and Resource Economics, University of California, One Shields Avenue, Davis, California 95616)

  • Richard J. Sexton

    (Department of Agricultural and Resource Economics, University of California, One Shields Avenue, Davis, California 95616)

Abstract

This study analyzes retail milk pricing by supermarkets and marketing margin behavior for four fluid milk products in nine large metropolitan markets in the Western United States. Multiple empirical approaches are utilized to investigate retailer pricing behavior, and, on balance, these methods provide significant evidence of noncompetitive price behavior in each of the markets. Correlations of retail price changes indicate considerable pricing independence among retailers across cities, while rankings of retail prices by milk product provide significant evidence that prices are not based primarily on costs, as would be true if pricing were competitive. Estimated retail price responses to farm price changes are consistent with monopoly pricing behavior for several of the milk products in several of the markets. [EconLit Citations: L660, L810]. © 2005 Wiley Periodicals, Inc. Agribusiness 21: 509-530, 2005.

Suggested Citation

  • Hoy F. Carman & Richard J. Sexton, 2005. "Supermarket fluid milk pricing practices in the western United States," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 509-530.
    • Handle: RePEc:wly:agribz:v:21:y:2005:i:4:p:509-530
    DOI: 10.1002/agr.20062
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    References listed on IDEAS

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    1. Carman, Hoy F., 1998. "California Milk Marketing Margins," Journal of Food Distribution Research, Food Distribution Research Society, vol. 29(3), pages 1-6, November.
    2. Mathieu Frigon & Maurice Doyon & Robert F.J. Romain, 1999. "Asymmetry in Farm-Retail Price Transmission in the Northeastern Fluid Milk Market," Food Marketing Policy Center Research Reports 045, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
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    5. Cotterill, Ronald W. & Dhar, Tirtha Pratim, 2003. "Oligopoly Pricing with Differentiated Products: The Boston Fluid Milk Market Channel," Research Reports 25189, University of Connecticut, Food Marketing Policy Center.
    6. Sexton, Richard & Zhang, Mingxia & Chalfant, James, 2003. "Grocery Retailer Behavior in the Procurement and Sale of Perishable Fresh Produce," Contractor and Cooperator Reports 291974, United States Department of Agriculture, Economic Research Service.
    7. Frigon, Mathieu & Doyon, Maurice & Romain, Robert F.J., 1999. "Asymmetry in Farm-Retail Price Transmission in the Northeastern Fluid Milk Market," Research Reports 25220, University of Connecticut, Food Marketing Policy Center.
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    Cited by:

    1. Rebecca Cleary & Jean-Paul Chavas, 2022. "Strategic supermarket pricing of private labels and manufacturer brands," Empirical Economics, Springer, vol. 62(6), pages 2921-2950, June.
    2. Davis, Christopher G. & Dong, Diansheng & Blayney, Donald P. & Yen, Steven T. & Stillman, Richard, 2012. "U.S. Fluid Milk Demand: A Disaggregated Approach," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 15(1), pages 1-26, February.
    3. Yizao Liu & Xuan Chen & Adam N. Rabinowitz, 2019. "The role of retail market power and state regulations in the heterogeneity of farm‐retail price transmission of private label and branded products," Agricultural Economics, International Association of Agricultural Economists, vol. 50(1), pages 91-99, January.
    4. Bolotova, Yuliya V., 2017. "An Analysis of Retail Fluid Milk Pricing in the Eastern United States," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252744, Southern Agricultural Economics Association.
    5. Farajzadeh, Z. & Amiraslany, A., 2018. "Examination of the international market power for Iranian pistachios," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277345, International Association of Agricultural Economists.
    6. Ricardo Medeiros de Castro, 2021. "Documento de Trabalho 001/2021- The problematic binary approach to the concept of dominance," Documentos de Trabalho 12021, Conselho Administrativo de Defesa Econômica (Cade), Departamento de Estudos Econômicos.
    7. Li, Lan & Carman, Hoy F. & Sexton, Richard J., 2005. "Grocery Retailer Pricing Behavior for California Avocados with Implications for Industry Promotion Strategies," 2005 Annual meeting, July 24-27, Providence, RI 19498, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Abdessalem Abbassi & Lota D. Tamini & Jean‐Philippe Gervais, 2012. "Do Inventories Have an Impact on Price Transmission? Evidence From the Canadian Chicken Industry," Agribusiness, John Wiley & Sons, Ltd., vol. 28(2), pages 173-186, March.
    9. Benaissa Chidmi & Rigoberto A. Lopez & Ronald W. Cotterill, 2005. "Retail oligopoly power, dairy compact, and Boston milk prices," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 477-491.
    10. Ferto, Imre & Bakucs, Lajos Zoltan, 2009. "The patterns of retail price variation. The case of milk products," 2009 Conference, August 16-22, 2009, Beijing, China 51670, International Association of Agricultural Economists.
    11. Xia, Tian & Li, Xianghong, 2009. "Asymmetric Price Transmission and Demand Characteristics," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49400, Agricultural and Applied Economics Association.
    12. Ahn, Byeong-Il & Lee, Hyunok, 2013. "Asymmetric transmission between factory and wholesale prices in fiberboard market in Korea," Journal of Forest Economics, Elsevier, vol. 19(1), pages 1-14.
    13. Bolotova, Yuliya V. & Novakovic, Andrew M., 2015. "An Empirical Analysis of Wholesale Cheese Pricing Practices on the Chicago Mercantile Exchange (CME) Spot Cheese Market," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 18(3), pages 1-18, September.
    14. Zoltán BAKUCS & Imre FERTŐ, 2015. "Empirical tests of sale theories: Hungarian milk prices," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 61(11), pages 511-521.
    15. Carman, Hoy F. & Li, Lan & Sexton, Richard J., 2009. "An Economic Evaluation of the Hass Avocado Promotion Order’s First Five Years," Research Reports 121697, University of California, Davis, Giannini Foundation.
    16. Bolotova, Yulia V., 2023. "Market Power in the U.S. Dairy Industry," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 5(2), March.
    17. Jung Hun HAN & Byeong-Il AHN, 2015. "Multiple-regime price transmission between wheat and wheat flour prices in Korea," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 61(12), pages 552-563.
    18. Rabinowitz, Adam. N. & Liu, Yizao, 2014. "The Impact of Regulatory Change on Retail Pricing: The New York State Milk Price Gouging Law," Agricultural and Resource Economics Review, Cambridge University Press, vol. 43(1), pages 178-192, April.
    19. Zeng, Shuwei & Gould, Brian, 2016. "Is There Asymmetric Price Transmission in the U.S. Fluid Milk Market?," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 237346, Agricultural and Applied Economics Association.
    20. Charlebois, Sylvain & Langenbacher, Wolfgang & Tamilia, Robert D., 2007. "The Canadian Dairy Commission: an empirical survey on its relevance in today's civil society," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 10(1), pages 1-19.
    21. Ricardo Medeiros de Castro, 2021. "Documento de Trabalho 01/2021- The problematic binary approach to the concept of dominance," Documentos de Trabalho 2021010, Conselho Administrativo de Defesa Econômica (Cade), Departamento de Estudos Econômicos.
    22. Bolotova, Yuliya V. & Novakovic, Andrew M., 2016. "An Analysis of Retail Milk Pricing in the Eastern United States," Journal of Food Distribution Research, Food Distribution Research Society, vol. 47(1), pages 1-8, March.
    23. Fertő, Imre & Bakucs, Lajos Zoltán, 2009. "Árleszállítások és a kiskereskedelmi árak változása a tejtermékek piacán [Sales and retail price patterns on the market for milk products]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 634-647.

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