Game theory application to Fed Cattle procurement in an experimental market

Consolidation in meatpacking has elicited many market power concerns and studies. A noncooperative, infinitely repeated game theory model was developed and an empirical model estimated to measure beef packing firm behavior in cattle procurement. Experimental market data from three semester-long clas...

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Bibliographic Details
Published in:Agribusiness (New York, N.Y.) N.Y.), 2009, Vol.25 (1), p.56-69
Main Authors: Carlberg, Jared G, Hogan, Robert J. Jr, Ward, Clement E
Format: Article
Language:English
Subjects:
beef cattle
business enterprises
Cattle
Cattle industry
decision making
econometric models
feedlots
Game theory
information dissemination
market collusion
market competition
Mathematical models
meat packing plants
model validation
Packaging
procurement
Purchasing
simulation models
Studies
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Summary:Consolidation in meatpacking has elicited many market power concerns and studies. A noncooperative, infinitely repeated game theory model was developed and an empirical model estimated to measure beef packing firm behavior in cattle procurement. Experimental market data from three semester-long classes using the Fed Cattle Market Simulator (FCMS) were used. Collusive behavior was found for all three data periods though the extent of collusion varied across semester-long data periods. Results may have been influenced by market conditions imposed on the experimental market in two of the three semesters. One was a marketing agreement between the largest packer and two feedlots and the other involved limiting the amount and type of public market information available to participants. Findings underscore the need for applying game theory to real-world transaction-level, fed cattle market data. [EconLit Citations: C730, L100].
ISSN:0742-4477
1520-6297
DOI:10.1002/agr.20181