@PhdThesis{diss_mods_00014212, author = {Antonova, Maria}, title = {Theoretical analysis of price transmission: a case of joint production}, year = {2014}, publisher = {Christian-Albrechts-Universit{\"a}t zu Kiel}, address = {Kiel}, keywords = {Price transmission; joint production; equilibrium displacement model; milk production}, abstract = {In order to improve the market-based relationships between the stakeholders of the food chain and to increase transparency along the chain it is necessary not only to detect the incomplete price relationship, but also to identify the causes of its malfunctioning. A number of studies investigate the mechanism of price transmission in order to theoretically identify the causes of incomplete price transmission. This dissertation intends to enlarge the theory on this issue. Following Gardner (1975), such studies traditionally use the equilibrium displacement methodology for this purpose. Since the middle of the last century, the equilibrium displacement methodology has been developed to incorporate new features, thus, contributing to the new results and discoveries in price transmission theory. For example, McCorriston et al. (2001) study the impact of market power and returns to scale on price transmission elasticity. By assigning certain values to the model parameters they prove that price transmission under perfect competition is higher than under imperfect competition, and that price transmission in the industry with increasing returns to scale, is higher than in the industry, with constant returns to scale. The sensitivity analysis within different scenarios shows that the role of returns to scale may either reinforce or offset the impact of market power. Gardner and McCorriston et al., however, focus on a single output product, whereas agricultural inputs often serve as ingredients for multiple outputs. Multiple outputs are generated spontaneously from a single production process so that the increase in production of one good cannot take place without a simultaneous increase in production of the other good. Therefore this work extends the model of McCorriston et. al. (2001) for price transmission in the case of multi-inputs-multi-outputs. Dairy industry is chosen as an example for this model, which produces goods-complements in production such as butter and skim milk powder or cheese and whey, however, both groups present the example of goods-substitutes in production, such as cheese and butter. Model results show that it is necessary to consider the properties of joint production when estimating the price transmission of jointly-produced goods because the price transmission of a jointly-produced output is different from that of a single output. The price transmission of a joint output is not equal to the share of agricultural input, as it is in the case of a single output (McCorriston et al., 1989). In the case of perfect competition and constant returns to scale, the price transmission of a joint output depends not only on the share of the agricultural input, as in the case of a single output, but additionally on the elasticities of demand of the jointly-produced goods and on the share of the joint output in a gross output. The price of an input is differently transmitted to two jointly-produced goods depending on two independent retail demand elasticities of those goods.}, url = {https://macau.uni-kiel.de/receive/diss_mods_00014212}, file = {:https://macau.uni-kiel.de/servlets/MCRFileNodeServlet/dissertation_derivate_00005339/Antonova_Dissertation_March_7.03.2014.pdf:PDF}, language = {en} }