Theoretical Restrictions on Farm-Retail Price Transmission Elasticities: A Note

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ABSTRACT

Zero restrictions implied by Gardner's (1975) model are exploited to develop a simple test for perfect price transmission. Applying the test to the domestic marketing channels for U.S. beef and pork, we reject the hypothesis of competitive market clearing for pork, but not for beef. A retest using the four-firm concentration ratio in U.S. meat packing as a proxy for market power affirms results from the simple test. [JEL Classification: Q11, Q13].

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