Dynamic Explanations of Industry Structure and Performance



Table 3. Cost Pass Through Rate Equations For Two Processors and Two Retailers:

Cost Pass Through Rates

Vertical Nash

Value if, Retail
Monopolies
a2 and b1 = 0

Vertical
Stackelberg

Value if, Retail
Monopolies
a2 and b1 = 0

Vertical

Coordination

Value if, Retail
Monopolies
a2 and b1 = 0

Effect of Farm Price Change dp
on Retail Price of 1             d

(3 a 1 - 2 a 2 )b 2
9 a 1 b 2 - 4 a 2 b1

1

3

(4 a 1 - 3 a 2)b 2
16 a 1 b 2 - 9 a 2 b1

1

4

b 2 (2a 1 - a 2)
4 a 1 b 2 - a 2 b1

1

2

Effect of Farm Price Change dp
on Retail Price of 1            ~m^

(3 b 2 - 2 b,)a,
9 a 1 b 2 - 4 a 2 b1

1

3

(4 b 2 - 3 b1 )a 1
16 a 1 b 2 - 9 a 2 b1

1

4

a 1(2 b 2 - b1)
4 a 1 b 2 - a 2 b1

1

2

Effect of Firm 1 Specific Cost dp
Change on Retail Price 1        ----

dm1

3 a 1 b 2

1

3

4 a 1 b 2

1

4

2 a 1 b 2

1

2

9 a 1 b 2 - 4 a 2 b1

16 a 1 b 2 - 9 a 2 b1

4 a 1 b 2 - a 2 b1

Effect of Firm 1 Specific Cost dp
Change on Retail Price 2       ----

dm1

— 2 a 1 b

0

- 3 a 1 b1

0

- a 1 b1

0

9 a 1 b 2 - 4 a 2 b1

16 a 1 b 2 - 9 a 2 b1

4 a 1 b 2 - a 2 b1

Effect of Firm 2 Specific Cost dp
Change on Retail Price 1        -----

dm 2

— 2 a 2 b 2

0

- 3 a 2 b 2

0

- a 2 b 2

0

9 a 1 b 2 - 4 a 2 b1

16 a 1 b 2 - 9 a 2 b1

4 a 1 b 2 - a 2 b1

Effect of Firm 2 Specific Cost dp
Change on Retail Price 2       -----

dm 2

3 a 1 b 2

1

3

4 a 1 b 2

1

4

2 a 1 b 2

1

2

9 a 1 b 2 - 4 a 2 b1

16 a 1 b 2 - 9 a 2 b1

4 a 1 b 2 - a 2 b1



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