Impact of Transportation Changes on Price Structures in City Milk Markets

The sporadic occurrence of price wars in city milk markets since World War II raises the question of underlying causes. This article suggests that these are to be found in the great advances in transportation. The ability to move milk rapidly and cheaply over great distances has made individual cities and their environs less meaningful as separate and distinct markets. Within the city, the use of private cars for shopping has made stores more important in selling milk. As a result, milk distributors within each city can no longer determine prices by themselves. They must reckon with the competition of distantly based milk distributors and they must also share their price-making powers with retail outlets in the city. Instability of prices is seen as a symptom of a period of transition during which business enterprises are expanded and reorganized to cope with the changed market situation.