Information Pooling and Collusion: Implications for The Livestock Mandatory Reporting Act
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Kenneth Njoroge
This paper develops a conceptual model that analyzes the impact of increasing market transparency under the Livestock Mandatory Reporting Act of 1999 on the incentives for collusion in the U.S. meatpacking industry. More than likely, meatpackers will have asymmetric priors regarding the distribution of livestock prices. Moreover, they lack the incentives to voluntarily reveal their real priors. Thus, the enforcer of the Act faces a problem of asymmetric information regarding the informativeness of publicly disclosed market reports relative to that of packers’ priors. Analytical results predict that divergent priors of Bayesian packers can be updated by more informative market reports, so that the resultant posteriors converge, enabling packers to identify a more efficient, unanimous trigger price. This enhances observability of deviations from collusive behavior, and increases the internal policing efficiency by a cartel that employs trigger price strategies to monitor deviations by its members. Contrary to the Act’s well-intended objectives, this is consistent with promoting collusion and decreasing market efficiency.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Article
- Cooperative Investment and the Value of Contracting with Transaction Costs
- Tough Love: Optimal Enforcement of Output Quotas in the Presence of Cheating
- Pricing-to-Market versus Residual Demand Elasticity Analysis of Imperfect Competition in Food Exports: Evidence from Germany
- Food Supply Management and Tariffication: A Game Theoretic Approach
- Social Welfare and the Market Power-Efficiency Tradeoff in U.S. Food Processing: A Note
- The Gains and Losses from Agricultural Concentration: A Critical Survey of the Literature
- Explaining Plant Exit in the U.S. Meat and Poultry Industries
- Contract Design: A Note on Cash Settled Futures
- Explaining Price Dispersion for Homogeneous Grocery Products
- An Essay on Cooperative Bargaining in U.S. Agricultural Markets
- Costly (Dis)Agreement: Optimal Intervention, Income Redistribution, and Transfer Efficiency of Output Quotas in the Presence of Cheating
- Inventory Constraints in a Dynamic Model of Imperfect Competition: An Application to Beef Packing
- Some Unintended Consequences of TRQ Liberalization
- Information Pooling and Collusion: Implications for The Livestock Mandatory Reporting Act
- Concentration and Innovation in the U.S. Food Industries
- Vertical Product Differentiation in Theory and Practice
- Agricultural Marketing Institutions: A Response to Quality Disputes
