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Estimating bargaining strengths of Canadian chicken producers and processors using a bilateral monopoly framework

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  • Jean-Philippe Gervais

    (Agri-industries and International Trade, CRÉA and Department of Agricultural Economics, Laval University, Québec, QC G1K 7P4 Canada)

  • Stephen Devadoss

    (Department of Agricultural Economics, University of Idaho, P.O. Box 442334, Moscow, ID 83844-2334)

Abstract

This study develops a dynamic price adjustment mechanism for the Canadian chicken industry using a bilateral monopoly framework. The model compares the processors and producers' bargaining strengths in order to determine the equilibrium price of live chickens in Ontario. The theoretical results show how the equilibrium price of live chickens and each party's profit depend on the coefficient of bargaining power. The stochastic properties of price and cost data call for cointegration techniques to infer the bargaining weights. The hypothesis of equal bargaining strengths between processors and producers in Ontario over the 1997-2002 period is strongly rejected by the data. It is shown that chicken processors had greater bargaining power than chicken producers because live chicken prices were highly correlated to chicken producers' average costs. [Econlit citations: C22, L13 and Q13]. © 2006 Wiley Periodicals, Inc. Agribusiness 22: 159-173, 2006.

Suggested Citation

  • Jean-Philippe Gervais & Stephen Devadoss, 2006. "Estimating bargaining strengths of Canadian chicken producers and processors using a bilateral monopoly framework," Agribusiness, John Wiley & Sons, Ltd., vol. 22(2), pages 159-173.
    • Handle: RePEc:wly:agribz:v:22:y:2006:i:2:p:159-173
    DOI: 10.1002/agr.20078
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    References listed on IDEAS

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    Cited by:

    1. Bruno Larue & Mohamed Jeddy & Sébastien Pouliot, 2013. "On the Number of Bidders and Auction Performance: when More Means Less," Cahiers de recherche CREATE 2013-4, CREATE.
    2. Tian, Li, 2006. "The Strategic Effect of Private Label in a Vertical Bargaining Model," Research Reports 170112, University of Connecticut, Food Marketing Policy Center.
    3. Kvartiuk, Vasyl & Herzfeld, Thomas & Bukin, Eduard, 2022. "Decentralized public farmland conveyance: Rental rights auctioning in Ukraine," Land Use Policy, Elsevier, vol. 114(C).
    4. Bruno Larue & Sébastien Pouliot & Mohamed Jeddy, 2016. "On the Number and Heterogeneity of Bidders in Livestock Auctions," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(2), pages 289-310, June.
    5. David M. McEvoy & Sylvia Brandt & Sven Anders, 2009. "The Effects of ITQ Management on Fishermen’s Welfare When the Processing Sector Is Imperfectly Competitive," Land Economics, University of Wisconsin Press, vol. 85(3), pages 470-484.
    6. Sabala, Ethan & Devadoss, Stephen, 2021. "Analysis of Chinese Tariff on Sorghum Market under Varying Market Structures," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 47(1), January.
    7. Abbassi Abdessalem & Gervais Jean-Philippe, 2010. "Evaluating Reforms in Canadian Chicken Marketing Mechanisms Using a Linear-Quadratic Inventory Model," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 8(1), pages 1-24, February.
    8. Sébastien Pouliot & Bruno Larue, 2012. "Import sensitive products and perverse tariff-rate quota liberalization," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 903-924, August.
    9. Abdessalem Abbassi & Lota D. Tamini & Jean‐Philippe Gervais, 2012. "Do Inventories Have an Impact on Price Transmission? Evidence From the Canadian Chicken Industry," Agribusiness, John Wiley & Sons, Ltd., vol. 28(2), pages 173-186, March.
    10. repec:ags:uconnr:149205 is not listed on IDEAS
    11. Pouliot, Sebastien & Larue, Bruno, 2011. "Institutionalized Metzler Effects: Tariff-Rate Quota Liberalization in a Supply-Managed Industry," Working Papers 102651, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
    12. Baoubadi Atozou & Lota D. Tamini & Maurice Doyon, 2022. "Bargaining power and risk from substitutability between products attributes the case of specialty eggs in Canada," Agricultural Economics, International Association of Agricultural Economists, vol. 53(1), pages 155-169, January.

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