Notes on farm‐retail price transmission and marketing margin behavior |
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Authors: | Henry W. Kinnucan Dengjun Zhang |
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Affiliation: | 1. Department of Agricultural Economics and Rural Sociology, Auburn University, Auburn, AL, USA;2. School of Business and Economics, University of Troms?, Troms?, Norway |
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Abstract: | Perfect farm‐retail price transmission sometimes is taken to mean an elasticity of price transmission (EPT) equal to 1. We show that this definition is inconsistent with Gardner's (1975) model. We also show that the absolute marketing margin (defined as the difference between the retail price and farm price) responds differently to shifts in retail demand, input supply, and technical change in the marketers’ production function than does the relative marketing margin (defined as the ratio of the retail price to the farm price). The empirical implications of these results are discussed in some detail. |
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Keywords: | Q11 Q13 Price transmission Marketing margin Market equilibrium Competition |
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