Volume 2, Issue 1

The relevant market in the U.S. sweetener complex was a subject of debate in the United States v. Archer-Daniels Midland, Co. & Nabisco court case, in which the defendants successfully argued that price fixing in the non-sugar sweetener market was impossible because sugar and high fructose corn syrup (HFCS) were substitutes. Hence, they were both part of the so-called “relevant market.” We use cointegration analysis to show that over a large period of time, sugar prices and HFCS were positively correlated. However, focusing only on the time period 1997 through 2001, sugar and HFCS prices are not correlated. This lack of correlation in the later period implies that beginning in 1997, the relevant market for HFCS does not include sugar. Thus questions are continuingly raised as to the competitiveness of the HFCS industry.

Contracting is a contentious issue in agriculture. Competing theories assert that risk or transactions cost drive contracting decisions, with some argument that autonomy also plays a role. We examine preferences for different contract attributes using a choice-based conjoint experiment. Results of a study of agricultural producers show that both risk and transactions cost play a role in contracting decisions. Autonomy also plays a role, especially to the extent that producers wish to avoid total loss of autonomy. These results suggest that the effects of risk and transactions cost are relative and should both be considered when analyzing contracting decisions.

This paper is a survey of the recent literature devoted to the economics of private labels. After providing some statistics about the development of private labels for different products in different OECD countries, the survey outlines what the literature says about the factors that favor the development of private labels, the reasons retailers introduce private labels, and the consequences of their development for the relationship between manufacturers and retailers. Issues that are less frequently addressed in the literature are also highlighted. The survey closes with discussing the impact of the development of private labels on welfare.

An important feature of agribusiness promotion programs is their lagged impact on consumption. Efficient investment in advertising requires reliable estimates of these lagged responses and it is desirable from both applied and theoretical standpoints to have a flexible method for estimating them. This note derives an alternative Bayesian methodology for estimating lagged responses when investments occur intermittently within a time series. The method exploits a latent-variable extension of the natural-conjugate, normal-linear model, Gibbs sampling and data augmentation. It is applied to a monthly time series on Turkish pasta consumption (1993:5-1998:3) and three, non-consecutive promotion campaigns (1996:3, 1997:3, 1997:10). The results suggest that responses were greatest to the second campaign, which allocated its entire budget to television media; that its impact peaked in the sixth month following expenditure; and that the rate of return (measured in metric tons additional consumption per thousand dollars expended) was around a factor of 20.

A number of studies show that consumers are willing to pay premiums for GM-Free foods. In this paper, we examine the effect, if any, that GM-Free messages have on product selection by the consumer. We made sample products which differed in the use of the labels and conducted two experiments: a choice experiment and a memory recall experiment. The result of our choice experiment demonstrates that the consumer who shows general concern about GM foods without relevant biotech knowledge responds to GM-Free messages on front labels. On the other hand, the result of our memory recall experiment shows that the consumer with relevant biotech knowledge uses the product information on back labels. Thus, firms can positively influence the product selection of biotech un-savvy consumers by placing GM-Free message on front labels.

Game theory and numerical simulation analyze the host government’s role in strategically regulating intellectual property rights (IPRs) for agricultural biotechnology in a developing country. A foreign monopolist imports and sells a genetically modified crop variety that will offer the host country both selective productivity gains and a negative externality. In this small open economy, only some heterogeneous producers adopt the new variety. Public policy consists of IPR enforcement and a corrective tax. Effectiveness of the tax depends upon the foreign monopolist’s ability to alter the price of the new technology and upon whether or not there is full enforcement of the IPRs. Whereas some governments may see their key decisions as being whether or not to license and to enforce IPRs on a genetically modified crop variety, greater gain might be realized through strategic choice of the tax rate to influence the rate of adoption among diverse domestic producers.

The paper presents some results from a stated-preference study that compares three samples of urban consumers of extra-virgin olive oil from three representative Italian cities: Naples (South), Rome (Centre) and Milan (North). A series of multinomial logit models are estimated from choice experiments responses and tested for unobserved heterogeneity for EU labelling informing on PDO/PGI, organic and place of origin attributes. The consequences of such form of heterogeneity are flashed out with respect to issues of market segmentation on the basis of the pattern of correlation across preferences as estimated from mixed logit models. Results indicate that product origin matters differently in different cities, while the sample from Naples is the least heterogeneous the Milan and Rome samples display highest taste heterogeneity, but also stronger intensity of taste.

Defining competition in a U.S. Courtroom involves the analytical and intellectual collision of the law’s pragmatic aspects with the academic realities of economics. Both disciplines depend heavily upon competition, and employ a rich dosage of competition language. However, “competition” in law and “competition” in economics are dramatically different.Economists often study market efficiencies. In an academic setting, economics and econometrics evaluate efficiency, and assess its achievement or failure. As a social science, the study of markets by economists often involves the specific assessment of market efficiencies. Here, too, the law’s social disciplines differ greatly from those of academic economics. Except for a few aberrant moments of brief duration, the process of making, enforcing, and litigating over legal principles in history’s democracies has never involved pursuit of an efficient economy, or even an efficient legal system. To the contrary, the law’s goal is to govern behavior to ensure fairness, justice, legal compliance, and not efficiency.Through analysis of a history-making U.S. cattle market trial, this paper considers legal “proof” and illustrates application of the rules of evidence and courtroom-level definitions of “proof” and “evidence.” Routinely, juries are instructed on what constitutes proof, and what does not. In the legal case that provides this paper’s illustrative focus, the United States District Court’s definition of evidence for the jurors, the court’s rulings on evidence issues, and the lawyers’ arguments of the evidence to the jury impacted an entire industry. The case provides a useful tool for studying and defining competition in a U.S. courtroom.

Product differentiation is well established as being the key source of the cereal industry’s high price-cost margins. However, there is little consensus as to whether pricing collusion is also a source of profitability, and indeed, whether price even serves as a strategic variable in this industry. This paper seeks to resolve this debate by determining whether cereal firms strategically interact on price, and if so, estimating the extent that this increases margins relative to what perfect collusion among firms could achieve. Firms are estimated to cooperate on price to the extent that margins are 2.5 percentage points higher than what is possible under a Nash-Bertrand game. This raises margins by about 43% of what could be achieved under a perfectly executed agreement to fix prices. The results are consistent with studies in the literature that characterize the industry’s pricing as "approximately cooperative."

This paper follows Lopez et al. (2002) by also focusing on the market power and efficiency consequences of increased concentration in U.S. food manufacturing industries. However, unlike these authors, who employed the techniques of the new empirical industrial organization to investigate increasing concentration, our approach is based on the older tradition of the structure-conduct-performance school. A consequence is our results turn out to be quite different. Unlike Lopez et al. (2002), efficiency effects dominate, meaning that the overall effect of rising concentration has been to lower prices. We suggest the difference is due to the inability of NEIO models, as presently constructed, to adequately deal with technological change, particularly technological change that applies to only a sub-set of firms. It is this kind of technological change that produces shifting advantages among firms and should be an important factor behind changes in concentration.

David Domina’s article: “Proving Anti-Competitive Conduct in the U.S. Courtroom: The Plaintiff’s Argument in Pickett v. Tyson Fresh Meats, Inc.,” Journal of Agricultural & Food Industrial Organization: Vol. 2: No. 1, Article 8, is littered with rank speculation and baseless opinion, most of which can be dismissed without further comment. However, Mr. Domina’s characterization of the Court’s post-trial ruling—in which the Court entered judgment in favor of Tyson—is a deliberate misstatement. This Journal’s readers are entitled to an accurate report of the Court’s disposition of the Pickett case, which I have provided in this Comment, and which can be verified by a review of the relevant court orders.

Thomas C. Green's comment on the article "Proving Anti-Competitive Conduct in the U.S. Courtroom: The Plaintiffs' Argument in Pickett v. Tyson Fresh Meats, Inc." Vol. 2 [2004], Article 8, ignores hundreds of exhibits, thousands of data parts, extensive testimony, and resorts to name calling.Proof is not litter, and evidence is not rank speculation. Inferences from evidence may be characterized by opposing counsel as "baseless opinion," and this is the substance of advocacy.But the Court's first trial ruling was correctly described in the original article. Mr. Green refers not to the Court's Order entering judgment as a matter of law notwithstanding the jury's verdict, but, instead, to an Order concerning taxation of costs.