The role of retail market power and state regulations in the heterogeneity of farm-retail price transmission of private label and branded products

Yizao Liu, Xuan Chen, Adam N. Rabinowitz

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Given the leading role of private label brands in the fluid milk market, it is of special interest to focus on possible differences in farm-retail price transmission between private label and branded milk as well as the causes of heterogeneity. This article examines the heterogeneous effects of private label and branded products on price transmission in the fluid milk market using a panel threshold asymmetric error correction model. Results indicate that upward retail-price adjustment is faster than the downward price adjustment for both private label and branded milk. The speed of adjustment of private label products is significantly faster than branded products in three different price regimes. We further investigate the reasons of heterogeneity in farm-retail price transmission of private label milk. We find that both retailer market power and state pricing regulations contribute to the heterogeneity in asymmetric price transmission. Higher retailer market power causes retail prices of private label milk to rise faster and to fall slower. The existence of a state pricing regulation slows down the adjustment speed of retail prices of private labels back to the long-run equilibrium, regardless of whether the retail price is low or high.

Original languageEnglish (US)
Pages (from-to)91-99
Number of pages9
JournalAgricultural Economics (United Kingdom)
Volume50
Issue number1
DOIs
StatePublished - Jan 1 2019

Fingerprint

market power
retail marketing
farms
fluid milk
milk
Market states
Private labels
Price transmission
Farm
Retail market
State regulation
Market power
Retail prices
markets
product labeling
Milk

All Science Journal Classification (ASJC) codes

  • Agronomy and Crop Science
  • Economics and Econometrics

Cite this

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The role of retail market power and state regulations in the heterogeneity of farm-retail price transmission of private label and branded products. / Liu, Yizao; Chen, Xuan; Rabinowitz, Adam N.

In: Agricultural Economics (United Kingdom), Vol. 50, No. 1, 01.01.2019, p. 91-99.

Research output: Contribution to journalArticle

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