Why a Well Functioning Market Generates Asymmetry of Farm and Wholesale Prices For Hogs and Pork

Conventional wisdom suggests that weekly prices at farm, wholesale, and retail levels should exhibit symmetry. Observation of asymmetrical price movements is submitted as evidence of the existence and use of "market power" at one or more levels of the market. However, application of economic theory of the market clearing process in a well functioning, competitive livestock market shows that weekly prices will move asymmetrically. Studies that confirm asymmetric weekly price movements in farm, wholesale, and retail prices of pork demonstrate that these markets are performing as we would expect well functioning, competitive markets to operate. Claims that evidence of asymmetric weekly (or even monthly and quarterly average prices) is not evidence of market power as claimed by the authors of the studies documenting the asymmetry.

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Working or Discussion Paper
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Working Paper
AEWP 2001-5

 Record created 2017-04-01, last modified 2018-01-22

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