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Bargaining, Search, and Price Dispersion: Evidence from the Live Hogs Market

Published online by Cambridge University Press:  15 September 2016

Tomislav Vukina  and
Xiaoyong Zheng
Tomislav Vukina
Affiliation:
Department of Agricultural and Resource Economics at North Carolina State University in Raleigh, North Carolina
Xiaoyong Zheng
Affiliation:
Department of Agricultural and Resource Economics at North Carolina State University in Raleigh, North Carolina
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Abstract

Using unique panel data on individual transactions between buyers and sellers in the spot market for live hogs, we found a large degree of intra-day price dispersion. Motivated by this empirical puzzle, we offer an explanation which is rooted in the bargaining with search theory. We formulate three hypotheses involving the role of farmers’ search cost, bargaining parties’ patience, and asymmetric information that we believe can explain the observed phenomenon. Empirical analysis shows strong support for all three of the stated theoretical predictions, indicating that the bargaining with search theory explains at least 31 percent of the observed intra-day price variation in this market.

Keywords

intra-day price dispersionbargaining theorysearch costasymmetric information
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 39 , Issue 3 , October 2010 , pp. 534 - 546
Copyright
Copyright © 2010 Northeastern Agricultural and Resource Economics Association 

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