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University of Florida
Levin College of Law

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Monday, June 6, 2011

How Retail Beef and Bread Prices Respond to Changes in Ingredient and Input and Costs

Posted by D. Daniel Sokol

Edward Roeger and Ephraim Leibtag explain How Retail Beef and Bread Prices Respond to Changes in Ingredient and Input and Costs.

ABSTRACT: The extent to which cost changes pass through a vertically organized production process depends on the value added by each producer in the chain as well as a number of other organizational and marketing factors at each stage of production. Using 36 years of monthly Bureau of Labor Statistics price indices data (1972-2008), we model pass-through behavior for beef and bread, two retail food items with different levels of processing. Both the farmto-wholesale and wholesale-to-retail price responses are modeled to allow for the presence of structural breaks in the underlying long-term relationships between price series. Broad differences in price behavior are found not only between food categories (retail beef prices respond more to farm-price changes than do retail bread prices) but also across stages in the supply chain. While farm-to-wholesale relationships generally appear to be symmetric, retail prices have a more compl! icated response behavior. For both bread and beef, the passthrough from wholesale to retail is weaker than that from farm to wholesale.

http://lawprofessors.typepad.com/antitrustprof_blog/2011/06/how-retail-beef-and-bread-prices-respond-to-changes-in-ingredient-and-input-and-costs-.html

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