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Alternative approaches in detecting asymmetry in farm-retail price transmission of fluid milk

Author

Listed:
  • Oral Capps

    (Department of Agricultural Economics, Texas A&M, University College Station, TX 77843 or aagiepolo@gmail.com)

  • Pablo Sherwell

    (Department of Agricultural Economics, Texas A&M, University College Station, TX 77843 or aagiepolo@gmail.com)

Abstract

Testing for asymmetric price transmission and calculating elasticities of price transmission are important areas of research for providing insights into market efficiency issues. We analyze the behavior of tests for asymmetry according to the conventional Houck approach and to the von Cramon-Taubadel and Loy error correction model (ECM) approach. We also estimate the short-run and long-run elasticities of price transmission between the farm and retail levels of the marketing channel for whole milk and 2% milk for seven U.S. cities by model specification. We employ monthly data over the period from January 1994 to October 2002. Consistent with the extant literature, empirical results suggest that the farm-retail price transmission process for milk is asymmetric. Price transmission elasticities, in conjunction with rising farm prices, are generally larger than corresponding elasticities associated with falling farm prices, but they all are quite inelastic. [JEL Classification: Q11, Q13]. © 2007 Wiley Periodicals, Inc. Agribusiness 23: 313-331, 2007.

Suggested Citation

  • Oral Capps & Pablo Sherwell, 2007. "Alternative approaches in detecting asymmetry in farm-retail price transmission of fluid milk," Agribusiness, John Wiley & Sons, Ltd., vol. 23(3), pages 313-331.
    • Handle: RePEc:wly:agribz:v:23:y:2007:i:3:p:313-331
    DOI: 10.1002/agr.20126
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    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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