Political market power reflected in milk pricing regulations

Byeong Il Ahn, Daniel A. Sumner

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

We investigate revealed political market power reflected in the pattern of price discrimination by end use that is the hallmark of U.S. milk marketing orders. We show that the pattern of prices that would maximize producer profits, if producers operated a cartel with monopoly power in a regional market, is far above actual government-set price differentials between milk used for fluid products and that used for manufactured products. The pattern of actual price differentials is consistent with political welfare weights for producers relative to consumers that are small compared to the weights that would yield maximum producer profits.

Original languageEnglish
Pages (from-to)723-737
Number of pages15
JournalAmerican Journal of Agricultural Economics
Volume91
Issue number3
DOIs
Publication statusPublished - 2009

Keywords

  • Dairy policy
  • Milk marketing orders
  • Political economy
  • Ramsey pricing

ASJC Scopus subject areas

  • Agricultural and Biological Sciences (miscellaneous)
  • Economics and Econometrics

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