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Market Power and Supply Shocks: Evidence from the Orange Juice Market

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  • Wang, Honglin
  • Xiang, Qing
  • Reardon, Thomas

Abstract

The orange juice market is a "weather market" because of its high geographical concentration and the natural characteristics of orange trees. A few hours of a freeze in Florida is enough to cause a supply shock to the orange juice market. How do oligopolistic firms react to supply shocks - do they become more collusive or more competitive? This paper empirically examines the proposition and finds that the level of market power of orange juice firms decreases significantly, and the market becomes more competitive during supply shocks even though prices rise.

Suggested Citation

  • Wang, Honglin & Xiang, Qing & Reardon, Thomas, 2006. "Market Power and Supply Shocks: Evidence from the Orange Juice Market," Staff Paper Series 11508, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    • Handle: RePEc:ags:midasp:11508
    DOI: 10.22004/ag.econ.11508
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    References listed on IDEAS

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    3. Nevo, Aviv, 2001. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Econometrica, Econometric Society, vol. 69(2), pages 307-342, March.
    4. Roll, Richard, 1984. "Orange Juice and Weather," American Economic Review, American Economic Association, vol. 74(5), pages 861-880, December.
    5. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    6. Unknown, 2002. "Consolidated Markets, Brand Competition, and Orange Juice Prices," Food Review/ National Food Review, United States Department of Agriculture, Economic Research Service, vol. 25(2), pages 1-1.
    7. Binkley, James K. & Canning, Patrick N. & Dooley, Ryan & Eales, James S., 2002. "Consolidated Markets, Brand Competition, and Orange Juice Prices," Agricultural Information Bulletins 33659, United States Department of Agriculture, Economic Research Service.
    8. Robert H. Porter, 1983. "A Study of Cartel Stability: The Joint Executive Committee, 1880-1886," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 301-314, Autumn.
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    Cited by:

    1. Jonathon Siegle & Gregory Astill & Zoë Plakias & Daniel Tregeagle, 2024. "Estimating perennial crop supply response: A methodology literature review," Agricultural Economics, International Association of Agricultural Economists, vol. 55(2), pages 159-180, March.
    2. repec:ags:aaea22:335761 is not listed on IDEAS
    3. Luckstead, Jeff & Devadoss, Stephen & Mittelhammer, Ron, 2015. "Imperfect Competition between Florida and Sao Paulo (Brazil) Orange Juice Producers in the U.S. and European Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(1), pages 1-15.
    4. Luckstead, Jeff & Devadoss, Stephen & Mittelhammer, Ron C., 2013. "Strategic Trade Policies in the U.S. Orange Juice Market: Competition between Florida and São Paulo," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149668, Agricultural and Applied Economics Association.
    5. Dhamodharan, Mahalingam & Devadoss, Stephen & Luckstead, Jeff, 2016. "Imperfect Competition, Trade Policies, and Technological Changes in the Orange Juice Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(2), May.

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