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Analysis of Changing Methods of Vertical Coordination in the Pork Industry

Published online by Cambridge University Press:  28 April 2015

Steve W. Martinez ,
Kevin E. Smith  and
Kelly D. Zering
Steve W. Martinez
Affiliation:
Economic Research Service, U.S. Department of Agriculture
Kevin E. Smith
Affiliation:
North Carolina State University
Kelly D. Zering
Affiliation:
North Carolina State University
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Abstract

This study examines the motivation behind contracts and vertical integration in the pork industry, and simulates the effects of potential improvements in coordination. Incentives related to lowering costs of measuring and sorting hogs, and protecting against opportunistic behavior associated with specific assets, can result in hog quality improvements. A framework for simulating the effects of increased coordination through contracts and vertical integration was developed and used to evaluate potential improvements in leanness. Although simulations suggest only modest changes in pork prices and supplies, gains in consumers' surplus could be substantial for larger demand shifts due to quality improvements.

Keywords

contractshogslean porksimulation modelvertical coordinationvertical integration
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 30 , Issue 2 , December 1998 , pp. 301 - 311
Copyright
Copyright © Southern Agricultural Economics Association 1998

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