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Another Look at Price Levelling and Price Averaging in the Sydney Meat Market

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  • Griffith, Garry R.
  • Green, W.
  • Duff, G.L.

Abstract

Simultaneous equation techniques are used to re-examine the behaviour of monthly wholesale and retail price spreads for beef, lamb and pork in Sydney over the period 1971-1988, so as to understand the factors determining the relationships between the prices at the different market levels. Hypotheses tested relate to price levelling and price averaging, and to marketing cost and turnover effects. Using the preferred three-stage least squares estimates, price levelling is confirmed at both wholesale and retail for all meats, however contrary to earlier results there is no evidence of price averaging in any of the meats. Costs are only important determinants for beef at wholesale and lamb at retail, and only the beef and lamb wholesale spreads and the lamb retail spread are negatively influenced by turnover. A structural change test reveals significantly different behavioural responses in the 1980s compared to the 1970s, so the model is re-estimated for just the 1980s. The results generally agree with those from the longer sample, with the only change being at the retail level where costs become significant for beef as well as lamb. However the level of explanatory power for the 1980-1988 models is substantially reduced from that of the full sample models.

Suggested Citation

  • Griffith, Garry R. & Green, W. & Duff, G.L., 1991. "Another Look at Price Levelling and Price Averaging in the Sydney Meat Market," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 59(02), pages 1-13, August.
    • Handle: RePEc:ags:remaae:12344
    DOI: 10.22004/ag.econ.12344
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    References listed on IDEAS

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    1. Griffith, G. R. & Whitelaw, R. A., 1975. "Sydney Meat Marketing Margins: January 1971 to June 1974," Archive 260383, New South Wales Department of Primary Industries Research Economists.
    2. Naughtin, John C. & Quilkey, John J., 1979. "Pricing Efficiency In The Retail Meat Market," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 23(1), pages 1-14, April.
    3. Griffith, Garry R., 1974. "Sydney Meat Marketing Margins - An Econometric Analysis," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 42(04), pages 1-17, December.
    4. Garry R. Griffith & Walter B. Moore, 1991. "Livestock Production Policies And Meat Processing Margins: The Case Of New Zealand, 1967‐1988," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 35(1), pages 21-48, April.
    5. John C. Naughtin & John J. Quilkey, 1979. "Pricing Efficiency In The Retail Meat Market," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 23(1), pages 48-61, April.
    6. Michael K. Wohlgenant, 1989. "Demand for Farm Output in a Complete System of Demand Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(2), pages 241-252.
    7. Wohlgenant, Michael K. & Haidacher, Richard C., 1989. "Retail to farm linkage for a complete demand system of food commodities," Technical Bulletins 312312, United States Department of Agriculture, Economic Research Service.
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    1. Mullen, John D., 1995. "The Influence of Fat and Weight on the Price of Lamb in the Homebush Livestock and Wholesale Markets," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 63(01), pages 1-13, April.
    2. Sibly, Hugh, 2002. "Loss averse customers and price inflexibility," Journal of Economic Psychology, Elsevier, vol. 23(4), pages 521-538, August.
    3. Adusei Jumah, 2004. "The long run, market power and retail pricing," Empirical Economics, Springer, vol. 29(3), pages 605-620, September.
    4. Zhao, Xueyan & Mullen, John D. & Griffith, Garry R. & Griffiths, William E. & Piggott, Roley R., 2000. "An Equilibrium Displacement Model of the Australian Beef Industry," Research Reports 28007, New South Wales Department of Primary Industries Research Economists.
    5. Mounter, Stuart W. & Griffith, Garry R. & Piggott, Roley R. & Mullen, John D., 2005. "The Relative Payoffs From R&D and Generic Advertising Expenditure by the Australian Pig Industry," Working Papers 12943, University of New England, School of Economics.
    6. Griffith, Garry & Dambui, Charles & Mounter, Stuart, 2023. "A Model of Farm Price Levelling when Variability comes from Export Demand, Illustrated with Coffee Marketing Margin Data in Papua New Guinea, 1999-2010," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 14(03), September.
    7. Hahn, William F. & Green, Richard D., 2000. "Joint Costs In Meat Retailing," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(1), pages 1-19, July.
    8. Chung, Kit C. & Griffith, Garry R., 2009. "Another look at market power in the Australian fresh meat industries," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 17, pages 1-18.
    9. Mounter, Stuart W. & Griffith, Garry R. & Piggott, Roley R. & Mullen, John D., 2005. "The Payoff from Generic Advertising by the Australian Pig Industry: Further Results Relative to the Payoff from R&D," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 13.
    10. Hugh Sibly, 1995. "Price Dynamics in Repeat‐Purchase Markets," The Economic Record, The Economic Society of Australia, vol. 71(2), pages 179-190, June.
    11. Griffith, Garry R. & Jamandre, W.E. & Piggott, Roley R., 1992. "A Note on Price Levelling and Price Averaging in Sydney Retail Vegetable Price Spreads," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 60(01), pages 1-13, April.
    12. Morales, L. Emilio, 2017. "The Effects of International Price Volatility on Farmer Prices and Marketing Margins in Cattle Markets," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 21(3), December.
    13. Mullen, John D. & Alston, Julian M., 1995. "The Impact on the Australian Lamb Industry of Producing Larger Leaner Lamb," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 62(01), pages 1-19, April.

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    Demand and Price Analysis;

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