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Asymmetric farm-retail price transmission and market power: a new test

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  • Ram Acharya
  • Henry Kinnucan
  • Steven Caudill

Abstract

A finite mixture model is used to estimate farm-retail price transmission in the US fresh strawberry market. Results suggest two distinct pricing regimes associated with off- and peak-harvesting seasons. The market power parameter is significant in the peak-harvest regime, but not in the off-peak regime. Moreover, price changes are transmitted completely throughout the marketing channel in the off-peak regime when the market power parameter is zero, but not in the peak-harvest regime when the market power parameter is positive. This suggests that produce buyers are more apt to exercise market power when farm supplies are abundant than when they are scarce, and that the exercise of such power causes the farm-retail price linkage to become asymmetric.

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  • Ram Acharya & Henry Kinnucan & Steven Caudill, 2011. "Asymmetric farm-retail price transmission and market power: a new test," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4759-4768.
    • Handle: RePEc:taf:applec:v:43:y:2011:i:30:p:4759-4768
    DOI: 10.1080/00036846.2010.498355
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    2. Čechura, Lukáš & Žáková Kroupová, Zdeňka & Hockmann, H., 2015. "Market Power in the European Dairy Industry," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 7(4), pages 1-9, December.
    3. Luca Cacchiarelli & Daniel Lass & Alessandro Sorrentino, 2016. "CAP Reform and Price Transmission in the Italian Pasta Chain," Agribusiness, John Wiley & Sons, Ltd., vol. 32(4), pages 482-497, November.
    4. Ahmad Ridha & Raja Masbar & Aliasuddin Aliasuddin & Vivi Silvia, 2022. "Asymmetric Price Transmission in the Cocoa Supply Chain in Indonesia," Economia agro-alimentare, FrancoAngeli Editore, vol. 24(1), pages 1-21.
    5. Cechura, Lukas & Žáková Kroupová, Zdenka & Hockmann, Heinrich, 2015. "Market power in the European dairy industry," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 7(4), pages 39-47.
    6. Heesun Lim & Byeong-Il Ahn, 2020. "Asymmetric price transmission in the distribution channels of pork: Focusing on the effect of policy regulation of Sunday sales by hypermarkets in Korea," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(11), pages 499-509.
    7. Cechur, Lukas & Hockmann, Heinrich & Levkovych, Inna, 2015. "Do the EU food processors abuse Oligopsony market power?," 2015 Conference, August 9-14, 2015, Milan, Italy 212043, International Association of Agricultural Economists.
    8. Arida, Agustina & Masbar, Raja & Majid, M. Shabri Abd. & Indra, I., 2023. "Does vertical asymmetric price transmission exist in the rice markets?," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 9(1), March.
    9. Alain McLaren, 2015. "Asymmetry in Price Transmission in Agricultural Markets," Review of Development Economics, Wiley Blackwell, vol. 19(2), pages 415-433, May.
    10. Alexandre Belloni & Giuseppe Lopomo & Shouqiang Wang, 2017. "Resource Allocation Under Demand Uncertainty and Private Information," Management Science, INFORMS, vol. 63(12), pages 4219-4235, December.
    11. Beatriz Velázquez & Bruno Buffaria, 2017. "About farmers’ bargaining power within the new CAP," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 5(1), pages 1-13, December.
    12. Ridha, Ahmad & Masbar, Raja & Aliasuddin & Silvia, Vivi, 2022. "Asymmetric Price Transmission in the Cocoa Supply Chain in Indonesia," Economia agro-alimentare / Food Economy, Italian Society of Agri-food Economics/Società Italiana di Economia Agro-Alimentare (SIEA), vol. 24(1), May.
    13. Daphne M.I. Verreth & Grigorios Emvalomatis & Frank Bunte & Ron Kemp & Alfons G.J.M. Oude Lansink, 2015. "Price Transmission, International Trade, and Asymmetric Relationships in the Dutch Agri‐Food Chain," Agribusiness, John Wiley & Sons, Ltd., vol. 31(4), pages 521-542, October.
    14. Tsion Taye Assefa & Miranda P.M. Meuwissen & Cornelis Gardebroek & Alfons G.J.M. Oude Lansink, 2017. "Price and Volatility Transmission and Market Power in the German Fresh Pork Supply Chain," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(3), pages 861-880, September.

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