A Model of Price Determination for Fresh Produce with Application to California Iceberg Lettuce

11 Pages Posted: 25 Mar 2020

See all articles by Richard J. Sexton

Richard J. Sexton

University of California, Davis - Department of Agricultural and Resource Economics

M. Zhang

The California Independent Operator - Market Analysis

Date Written: November 1996

Abstract

Most fresh produce commodities are highly perishable. Thus, supply at any time is fixed at prices above marginal harvest costs. In this paper we develop a model of short‐run farm price determination for produce commodities that incorporates this key structural feature and also allows for imperfect competition in price determination. The model is empirically manifest in a switching regression framework and applied to California iceberg lettuce. Results support the general model relative to a model restricted to competitive behavior and suggest that retailer/buyers capture most of the rents from lettuce production and sale.

Keywords: iceberg lettuce, imperfect competition, price determination, switching regression, Q110

Suggested Citation

Sexton, Richard J. and Zhang, Mingxia, A Model of Price Determination for Fresh Produce with Application to California Iceberg Lettuce (November 1996). American Journal of Agricultural Economics, Vol. 78, Issue 4, pp. 924-934, 1996, Available at SSRN: https://ssrn.com/abstract=3560434 or http://dx.doi.org/10.2307/1243849

Richard J. Sexton (Contact Author)

University of California, Davis - Department of Agricultural and Resource Economics ( email )

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Davis, CA 95616
United States
530-752-2219 (Phone)

Mingxia Zhang

The California Independent Operator - Market Analysis ( email )

Folsom, CA 95763-9014
United States

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