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Price Bargaining Without Supply Control

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  • Kinnucan, Henry W.

Abstract

Primary food producers are permitted to bargain as a group for higher prices. Supply response, however, is critical to the long-run success of producer cartels. This article presents a model that elucidates that role of supply response in agricultural price bargaining when no overt action is taken to limit quantity and participation in the cartel is voluntary. Free-riding, for example, is seen as having a dual nature: it undermines the cartel's influence at the negotiating table but it enhances the cartel's ability to sustain a negotiated price increase by attenuating supply response. That price bargaining can result in significant transfers from processors to producers when demand is inelastic and supply is uncontrolled is highlighted in the empirical application.

Suggested Citation

  • Kinnucan, Henry W., 1995. "Price Bargaining Without Supply Control," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 24(1), pages 1-9, April.
    • Handle: RePEc:ags:arerjl:31459
    DOI: 10.22004/ag.econ.31459
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    File URL: https://ageconsearch.umn.edu/record/31459/files/24010119.pdf
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    References listed on IDEAS

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    1. Sexton, Richard J., 1994. "A Survey of Noncooperative Game Theory with Reference to Agricultural Markets: Part 2. Potential Applications in Agriculture," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 62(02), pages 1-18, August.
    2. Henry W. Kinnucan & Robert G. Nelson, 1993. "Vertical Control and the Farm-Retail Price Spread for EGGS," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 15(3), pages 473-482.
    3. Kinnucan, Henry & Sullivan, Gregory, 1986. "Monopsonistic Food Processing and Farm Prices: The Case of the West Alabama Catfish Industry," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 18(2), pages 15-24, December.
    4. George W. Ladd, 1974. "A Model of a Bargaining Cooperative," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(3), pages 509-519.
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    Cited by:

    1. Henry W. Kinnucan & Yuliang Miao, 1999. "Media-specific returns to generic advertising: The case of catfish," Agribusiness, John Wiley & Sons, Ltd., vol. 15(1), pages 81-99.
    2. Henry W. Kinnucan & Maria Thomas, 1997. "Optimal Media Allocation Decisions For Generic Advertisers," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1‐3), pages 425-441, January.
    3. Chin, Ming-Chin & Weaver, Robert D., 2004. "Forward Contracting Specification Through Collective Bargaining," 2004 Annual meeting, August 1-4, Denver, CO 20006, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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    Keywords

    Demand and Price Analysis;

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