Social and Behavioral Sciences Commons^™

Marketing Margins, Market Power, And Price Uncertainty, John Schroeter, Azzeddine Azzam

Azzeddine Azzam

This paper provides a conceptual and empirical framework for analyzing marketing margins in a noncompetitive food-processing industry facing output price uncertainty. The framework allows for the decomposition of observed margins into components reflecting the marginal cost of the processing industry, oligopoly/oligopsony price distortions, and an output price risk component. The empirical procedure is applied to a time series of spreads between wholesale pork prices and farm prices of market hogs. The principal finding is that, while farm/wholesale margins are more consistent with competitive performance now than they were fifteen years ago, the output price risk component persisted throughout the sample …