Processing Technology, Market Power and Price Transmission

McCorriston, Steve; Morgan, C. Wyn; Rayner, A. J.

doi:10.1111/j.1477-9552.1998.tb01263.x

Cited by 79 publications

(60 citation statements)

References 13 publications

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“…It is, however, important to distinguish between the two types of long-run relationships -static equilibrium where the variables are assumed to be unchanging between periods, and stable equilibrium where all variables are changing at some constant rate. Most previous studies concerning long-run relationships between producer and retail prices are based on static equilibrium models of firm behaviour (e.g., Gardner 1975, Wohlgenant 1989, Griffith and Moore, 1991McCorriston and Rayner, 1998). These studies assume equality of supply and demand in the respective producer, retail and marketing-input markets.…”

Section: Introductionmentioning

confidence: 99%

The long run, market power and retail pricing

Jumah

2004

Empirical Economics

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The paper uses the Johansen cointegration approach to analyse long-run pricing strategies of pork and chicken retailers in Austria. Long-run retail pricing strategy is found to be dependent on market share and price elasticity of demand for product. A combination of mark-up pricing strategy for pork and a competitive pricing strategy for chicken is considered by retailers to yield maximum profit. Long-run price adjustment reveals linkages to pricing strategy. The versatility of the Johansen cointegration technique as a tool capable of analysing both competitive and imperfect market situations is also revealed. The paper recommends meat policy to be product specific rather than holistic. KeywordsMarket power, markup pricing, cointegration, long run JEL Classifications C32, D43, L11, Q13 CommentsThe research on which this article is based began in 1995 at the Federal Institute of Agricultural Economics, Vienna, with the support of the Austrian Federal Ministry of Agriculture and Forestry. An earlier version of the paper was presented at the 264 th NFJ Seminar, Alnarp, Sweden, 1996. The author is grateful to Karl M. Ortner for the data and to Robert M. Kunst, Karl M. Ortner, Martin Wagner, and seminar participants for useful comments on earlier drafts.

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Section: Introductionmentioning

confidence: 99%

The long run, market power and retail pricing

Jumah

2004

Empirical Economics

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“…Lately, McCorriston et al and Lloyd et al [37][38][39] develop a framework to show how market power may lead to imperfect price transmission. Indeed, also in oligopoly, both positive and negative asymmetric price transmission may occur.…”

Section: On Vertical Price Transmissionmentioning

confidence: 99%

A Review of Supply Chain Prices Analyses with Emphasis on Perishable Markets

Santeramo¹,

Gioia²

2018

Agricultural Value Chain

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Prices at different levels of the supply chain are linked through long-run relationships and tend to differ by the marketing costs. However, several aspects intervene in making price dynamics along the supply chain quite complicated and erratic. In particular, several issues on how marketing margins evolve over time and across commodities, as well as how prices are transmitted along the supply chain are still debated. The implications for the understanding of the economy, the management of the firms, and the regulations of the markets are important and pushed scholars to dedicate particular attention to these topics. In particular, how prices evolve in the supply chain of perishable products is an intriguing challenge that has stimulated a hot debate. We review the literature on price analyses, marketing margins, and vertical price transmission with particular emphasis on perishable products (fruits and vegetables) in order to conclude on the open issues worth further investigation.

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“…There is a substantive theoretical literature on the issue of incidence on the presence of buyer/seller power (see, for example, Bulow and Pfleiderer (1983) as an early example). McCorriston et al (1998) extend this analysis in the context of the traditional retail-farm spread model while Weldegebriel (2004) further extends this theoretical framework to explore the role of oligopsony and the spread between retail and farm level prices. From the empirical side, Feuerstein (2002) and Delipalla and O'Donnell (2001), represent recent examples using the role of exogenous shifters to detect the relationship between seller power and incidence.…”

Section: (B) Related Literaturementioning

confidence: 99%

“…8 However, our approach here is to start from the premise that widening margins have been already been identified as existing and thus our approach is to determine whether buyer power can be considered as one possible explanation of this and thus rejecting the null hypothesis would suggest more in-7 McCorriston et al (1998) also show that the behaviour of the retail-farm price spread is only marginally affected by the fixed versus variable proportions assumption and that buyer/seller power is likely to dominate the issue of technology. See also Sexton and Lavoie (2001) for a general critique of the variable proportions assumption in characterising links in the vertical chain.…”

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Buyer Power in U.K. Food Retailing: A 'First-Pass' Test

Lloyd¹,

McCorriston²,

Morgan³

et al. 2009

Journal of Agricultural &Amp; Food Industrial Organization

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The potential existence of buyer power in U.K. food retailing has attracted the scrutiny of the U.K.'s anti-trust authorities, culminating in the second of two comprehensive regulatory inquiries in recent years. Such inquiries are authoritative but correspondingly time-consuming and costly. Moreover, detection of buyer power has been dogged by the paucity of reliable evidence of its existence. In this paper, we present a simple theoretical model of oligopsony which delivers quasireduced form retailer-producer pricing equations with which the null of perfect competition can be tested using readily available market data. Using a cointegrated vector autoregression, we find empirical results that show the null of perfect competition can be rejected in seven of the nine food products investigated. Though not conclusive on the existence of buyer power, the proposed test offers a means via which the behaviour of the retail-producer price spread is consistent with it. At the very least, it can corroborate the concerns of the anti-trust authorities as to whether buyer power is potentially one source of concern.

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Processing Technology, Market Power and Price Transmission

Cited by 79 publications

References 13 publications

The long run, market power and retail pricing

The long run, market power and retail pricing

A Review of Supply Chain Prices Analyses with Emphasis on Perishable Markets

Buyer Power in U.K. Food Retailing: A 'First-Pass' Test

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