Political Market Power Reflected in Milk Pricing Regulations

15 Pages Posted: 28 Apr 2020

See all articles by Byeong‐Il Ahn

Byeong‐Il Ahn

affiliation not provided to SSRN

Daniel A. Sumner

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

Date Written: August 2009

Abstract

We investigate revealed political market power reflected in the pattern of price discrimination by end use that is the hallmark of U.S. milk marketing orders. We show that the pattern of prices that would maximize producer profits, if producers operated a cartel with monopoly power in a regional market, is far above actual government‐set price differentials between milk used for fluid products and that used for manufactured products. The pattern of actual price differentials is consistent with political welfare weights for producers relative to consumers that are small compared to the weights that would yield maximum producer profits.

Keywords: dairy policy, milk marketing orders, political economy, Ramsey pricing

Suggested Citation

Ahn, Byeong‐Il and Sumner, Daniel A., Political Market Power Reflected in Milk Pricing Regulations (August 2009). American Journal of Agricultural Economics, Vol. 91, Issue 3, pp. 723-737, 2009, Available at SSRN: https://ssrn.com/abstract=3585805 or http://dx.doi.org/10.1111/j.1467-8276.2009.01261.x

Byeong‐Il Ahn (Contact Author)

affiliation not provided to SSRN

No Address Available

Daniel A. Sumner

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

One Shields Avenue
Davis, CA 95616
United States
530-752-5002 (Phone)
530-752-5614 (Fax)

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