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The Role of Spatial Density and Technological Investment on Optimal Pricing Strategies in the Grain Handling Industry

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  • Anton Bekkerman

    (Montana State University)

  • Mykel Taylor

    (Kansas State University)

Abstract

Shuttle-loading elevators represent an investment that may lower marginal grain-handling costs. Some portion of those savings could be passed on to farmers in the form of higher cash prices. We model the pass-through decision and exploit a natural, historical difference in Kansas and Montana wheat markets to test several pass-through hypotheses empirically. Using cross-sectional, temporal, and spatial variation in weekly wheat prices in 2005–2013, we find that—relative to conventional grain elevators in Kansas—shuttle-loading facilities offer a $0.13 per bushel premium. In Montana—where there is less spatial competition among elevators—the pass-through is only $0.04 per bushel.

Suggested Citation

  • Anton Bekkerman & Mykel Taylor, 2020. "The Role of Spatial Density and Technological Investment on Optimal Pricing Strategies in the Grain Handling Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(1), pages 27-58, August.
    • Handle: RePEc:kap:revind:v:57:y:2020:i:1:d:10.1007_s11151-019-09725-2
    DOI: 10.1007/s11151-019-09725-2
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