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Abstract

This article uses monthly price data to estimate farm-retail price response equations for three California market areas. The results indicate that there is a strong direct relationship between retail and farm-level milk prices-retailers increase and decrease their prices equally in response to f.o.b. price increases and decreases. While the total retail response to farm price increases and decreases is equal, the timing of the adjustments is not. Farm price increases during a given month led to retail price increases during the same month while farm price decreases were not fully reflected in retail prices until the following month.

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