Asymmetric response of retail milk prices in the northeast revisited

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Abstract

Retail milk price responses to farm price changes were analyzed for Boston, Massachusetts, and Hartford, Connecticut. Prior research concluded that asymmetries did not exist in the response of retail fluid milk prices to changes in farm prices. This study finds transmission rates are greater for the Compact period (100–120%) than the pre-Compact period (66–88%). Short-run asymmetries are apparent. Retail prices respond rapidly to farm price increases, but slowly to farm price decreases. This study also finds evidence of long-run asymmetry. When equivalent farm price increases and decreases occur, retail prices do not return to the same levels that were observed before the price changes. Such long-run asymmetry was not observed in prior empirical studies of retail prices in the Northeast. [EconLit Classification: Q110, Q130, L110]. © 2005 Wiley Periodicals, Inc. Agribusiness 21: 493–508, 2005.

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