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 language | English |
|---|---|
| Pages (from-to) | 723-737 |
| Number of pages | 15 |
| Journal | American Journal of Agricultural Economics |
| Volume | 91 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 2009 Jun 18 |
| Externally published | Yes |
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Keywords
- Dairy policy
- Milk marketing orders
- Political economy
- Ramsey pricing
ASJC Scopus subject areas
- Agricultural and Biological Sciences (miscellaneous)
- Economics and Econometrics
Cite this
Political market power reflected in milk pricing regulations. / Ahn, Byeong-il; Sumner, Daniel A.
In: American Journal of Agricultural Economics, Vol. 91, No. 3, 18.06.2009, p. 723-737.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Political market power reflected in milk pricing regulations
AU - Ahn, Byeong-il
AU - Sumner, Daniel A.
PY - 2009/6/18
Y1 - 2009/6/18
N2 - 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.
AB - 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.
KW - Dairy policy
KW - Milk marketing orders
KW - Political economy
KW - Ramsey pricing
UR - http://www.scopus.com/inward/record.url?scp=67049167378&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=67049167378&partnerID=8YFLogxK
U2 - 10.1111/j.1467-8276.2009.01261.x
DO - 10.1111/j.1467-8276.2009.01261.x
M3 - Article
VL - 91
SP - 723
EP - 737
JO - American Journal of Agricultural Economics
JF - American Journal of Agricultural Economics
SN - 0002-9092
IS - 3
ER -