Bargaining, Search, and Price Dispersion: Evidence from the Live Hogs Market
نویسندگان
چکیده
Using unique panel data on individual transactions between buyers and sellers in the spot market for live hogs, we found a large degree of intra-day price dispersion. Motivated by this empirical puzzle, we offer an explanation which is rooted in the bargaining with search theory. We formulate three hypotheses involving the role of farmers’ search cost, bargaining parties’ patience, and asymmetric information that we believe can explain the observed phenomenon. Empirical analysis shows strong support for all three of the stated theoretical predictions, indicating that the bargaining with search theory explains at least 31 percent of the observed intraday price variation in this market.
منابع مشابه
Do Alternative Marketing Arrangements Increase Pork Packers’ Market Power?
In this article we use structural econometrics to formally test whether the use of the alternative marketing arrangements (AMAs) by pork packers is the source of their market power on the spot (cash) market for live hogs. We specify the pork packers’ conjectures of the change in the industry total market procurement of live hogs through the spot market with respect to their AMAs stocks. The tes...
متن کاملPrice Dispersion with Directed Search1
We model a market where identical buyers direct their search to identical capacity-constrained sellers. Sellers cannot fully commit to the list price so strategic bargaining may determine the sale price. We study search and pricing behavior in symmetric equilibrium. Sale prices exhibit equilibrium dispersion as they respond naturally to local demand conditions. Uncoordinated search decisions le...
متن کاملPrice discrimination and bargaining power in the global vaccine market
Since the 1980s, the market structure of vaccines has become increasingly oligopolistic, and in some cases, monopolistic. Alongside these supply trends, we see the emergence and growth of group procurement schemes on the demand side of the market. National governments and international organizations procure vaccines on behalf of end users. Two such organizations include the UNICEF Supply Divisi...
متن کاملThe Impact of Shopbot Use on Prices and Price Dispersion: Evidence from Online Book Retailing
The growth of Internet price search tools, notably shopbots, has reduced consumers’ search costs for price and some product characteristics. While a variety of analytic models predict that increased consumer search through shopbots will lower price levels among competing retailers, there is no consensus in the empirical literature as to whether price dispersion will increase or decrease in resp...
متن کاملGoodbye Price Dispersion? New Evidence from Transaction Prices in Electronic Markets
Price dispersion is an important indicator of market efficiency. Internet-based electronic markets have the potential to reduce transaction costs, thereby creating more efficient, “frictionless” markets, as predicted by the “law of one price”. However, prior work has reported significant levels of price dispersion on the Internet, which is in contrast with theoretical predictions. A key feature...
متن کامل