Uncertainty and Producer Fed Cattle Marketing Decisions: Theory and Evidence

The effect of carcass quality uncertainty on the structure of the slaughter cattle market is investigated. A theoretical extension of the "Theory of Factor Price Disparity" is provided. It is demonstrated that the coexistence of a risk premium wedge between pricing mechanisms (live wt., dressed wt., and grid) in conjunction with varying degrees of risk aversion across fed cattle producers explains the coexistence of multiple pricing mechanisms. It is also demonstrated that risk and risk preference provides a plausible explanation for the structure of the fed cattle market and for the variability in slaughter volume across marketing channels. Empirical evidence is provided in support of the supposition that carcass quality uncertainty plays a role in grid market share variability.


Issue Date:
2011-04
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/102692
Total Pages:
29
JEL Codes:
D40; D81; Q10
Note:
This article has been submitted to the CJAE.
Series Statement:
Economics Staff Paper
2011-1




 Record created 2017-04-01, last modified 2017-05-27

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)