Abstract
The objective of this study is to assess the degree and the structure of price dependence between different cuts in the US pork industry at the retail level. To this end, it utilizes monthly retail data of pork cuts and the statistical tool of copulas. The empirical results suggest that for all pairs, retail prices are not likely neither to boom nor to crash together, even though overall dependence is quite considerable for two of the three pairs considered in this study. No evidence of asymmetric price co-movements was found.
Highlights
Pork consumers are more conscientious about specific quality characteristics of their meat than they were before
Price asymmetry has been an important topic in agricultural and food economics over a long period of time, since it may be an indicator of market inefficiency
We employ the semi-parametric approach proposed by (Chen and Fan 2006) which involves three steps: (a) an Autoregressive Moving Average – Generalized Autoregressive Conditional Heteroskedasticity (ARMAGARCH) model is fit to each series of the rates of price changeb. (b) The obtained standardized residuals are used to calculate the respective empirical distribution functions, creating this way the copula data (c) The estimation of copula models is conducted by applying the maximum likelihood (ML) estimator to the copula data (Canonical ML)
Summary
Pork consumers are more conscientious about specific quality characteristics of their meat than they were before. Tenderness, appearance, juiciness, are just some of the characteristics that most of the consumers take into account when purchasing pork, apart from the price Despite this fact, most of the studies about the U.S pork industry have been carried out considering aggregate commodity prices, and treating the pork product as a non-differentiated good. Most of the studies about the U.S pork industry have been carried out considering aggregate commodity prices, and treating the pork product as a non-differentiated good Against this background, the objective of this paper is to investigate if the existence of product differentiation could be a source of asymmetric price co-movements between certain pork cuts at the retail level. Retailers/wholesalers can price discriminate based on the different attributes of the commodity This means that sellers might adopt different pricing strategies, depending on the cut, when market conditions change.
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