Marketing Agreement Impacts in an Experimental Market for Fed Cattle

Abstract

Marketing agreements between meatpacking and cattle feeding firms have created concerns about their effects on fed cattle prices. Profit-sharing marketing agreements were imposed onto a simulated fed cattle market. Price level and variability differences with and without agreements, between agreement participants and nonparticipants, during agreement and nonagreement periods, and between participants receiving and not receiving a monetary incentive were evaluated. Prices and variability for nonagreement cattle were higher during the agreement periods. Marketing agreement participants realized lower, less variable prices than nonparticipating firms. Monetary incentives did not affect price levels but increased price variability. Copyright 1999, Oxford University Press.

Game theory application to Fed Cattle procurement in an experimental market

“…It is plausible that the marketing agreement gave the largest packer, the three packers not participating in the agreement, or all packers together an opportunity to behave collusively. Examining price behavior during the 1995 semester, higher prices were found but prices were much more variable during the marketing agreement periods (Ward et al, 1999). As a consequence, no conclusive evidence was found that the marketing agreement adversely affected buyer competition.…”

“…In two of the three semesters, a designed experiment was imposed on the experimental market. In 1995, researchers estimated impacts from imposing a marketing agreement between the largest packer and the two largest feedlots at two, 16-week intervals (Ward, Koontz, Dowty, Trapp, and Peel, 1999). Student teams received cash awards for their profit performance during randomly selected periods, as suggested for experimental economics research (Friedman & Sunder, 1994).…”

Alternative Theories and Empirical Approaches to Price Discovery: An Application to Fed Cattle

“…Price and quantity data were tested for con- 1995 1996 sistency using analysis of variance (ANOVA) and found not to be significantly different over the 3 years (Carlberg and Ward). This consistency occurred even with imposing specific experimental designs on the classes in 1995 (Anderson et al) and 1996 (Ward et al, 1999).…”

Integrating auction theory with traditional measures of market power

“…The FCMS has been successfully used with cattle market participants (Koontz, Peel, Trapp, & Ward, 1994;Ward, 2005) as well as students (Carlberg, Hogan, & Ward, 2009;Ward, Koontz, Dowty, Trapp, & Peel, 1999) with no apparent differences between the groups. The students were organized in four packer teams (each with four members) and eight feedlot manager teams (each with three or four members).…”