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The impact of the Northeast Dairy Compact on New England consumers: A report from the milk policy wars

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  • Ronald W. Cotterill

    (Food Marketing Policy Center, Department of Agriculture and Resource Economics, University of Connecticut, Storrs, CT 06249-4021)

Abstract

This paper presents a comparative analysis of three different economic studies that played major roles in the policy debate over the Compact. It draws an important distinction between before and after analysis and counterfactual impact analysis and highlights constraining assumptions in models. Over time, the Compact increased raw milk price 2-3 cents per gallon, but if the Compact had not been in place during the first three years of its operation, raw milk prices would have been approximately 10 cents lower. Over time, retail prices went up by much more than 2-3 cents because other costs increased and channel firms increased tacit collusion and net profits. Studies give different counterfactual estimates for retail prices without the Compact. They range from a drop of 5.7 cents per gallon to 20.7 cents per gallon and are very sensitive to modeling approach. Comparative analysis, as done in this article, should contribute to policy formulation rather than appearing ex post. [EconLit citations: L66 L11 L13]. © 2005 Wiley Periodicals, Inc. Agribusiness 21: 455-471, 2005.

Suggested Citation

  • Ronald W. Cotterill, 2005. "The impact of the Northeast Dairy Compact on New England consumers: A report from the milk policy wars," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 455-471.
    • Handle: RePEc:wly:agribz:v:21:y:2005:i:4:p:455-471
    DOI: 10.1002/agr.20059
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    References listed on IDEAS

    as
    1. Ronald Cotterill & Leonard Egan & William Buckhold, 2001. "Beyond Illinois Brick: The Law and Economics of Cost Pass-Through in the ADM Price Fixing Case," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(1), pages 45-52, February.
    2. Joseph V. Balagtas & Daniel A. Sumner, 2003. "The Effect of the Northeast Dairy Compact on Producers and Consumers, with Implications of Compact Contagion," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 25(1), pages 123-144.
    3. repec:reg:rpubli:206 is not listed on IDEAS
    4. Cotterill, Ronald W. & Pinkerton, Don C. & Haller, Lawrence E., 1990. "Economic Analysis of the Proposed Dairy Income Enhancement Program," Research Reports 25204, University of Connecticut, Food Marketing Policy Center.
    5. Ronald W. Cotterill, 2002. "A Northeast Dairy Compact Post Mortem," Issue Papers 28, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    6. Lass, Daniel A. & Adanu, Mawunyo & Allen, P. Geoffrey, 2001. "Impacts Of The Northeast Dairy Compact On New England Retail Prices," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 30(1), pages 1-10, April.
    7. Cotterill, Ronald, 2002. "A Northeast Dairy Compact Post Mortem," Issue Papers 169385, University of Connecticut, Food Marketing Policy Center.
    8. Dale M. Heien, 1980. "Markup Pricing in a Dynamic Model of the Food Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(1), pages 10-18.
    9. Cotterill, Ronald & Andrew, Franklin, 2001. "A PowerPoint® Deconstruction of the Farm and Retail Price Analysis Presented in "The Public Interest and Private Economic Power: A Case study of the Northeast Dairy Compact"," Issue Papers 169378, University of Connecticut, Food Marketing Policy Center.
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