Hostname: page-component-cd9895bd7-8ctnn Total loading time: 0 Render date: 2024-12-27T07:25:36.286Z Has data issue: false hasContentIssue false
  • English
  • Français

An Experimental Economics Approach to Analyzing Price Discovery in Forward and Spot Markets

Published online by Cambridge University Press:  28 April 2015

Joseph L. Krogmeier ,
Dale J. Menkhaus ,
Owen R. Phillips  and
John D. Schmitz
Joseph L. Krogmeier
Affiliation:
Department of Agricultural Economics, University of Wyoming
Dale J. Menkhaus
Affiliation:
Department of Agricultural Economics, University of Wyoming
Owen R. Phillips
Affiliation:
Department of Economics and Finance, University of Wyoming
John D. Schmitz
Affiliation:
Department of Agricultural Economics, University of Wyoming
Get access Rights & Permissions [Opens in a new window]

Abstract

Laboratory experiments are used to generate data that facilitate investigation of pricing behavior in forward and spot markets. Results suggest a tendency for prices in a spot market to converge to levels higher than those in a forward market. The difference in these market environments is the supply schedule. Buyers in a spot market are aware that supply is inelastic and become relatively aggressive bidders. Forward markets have a relatively elastic supply schedule and buyers fare better. This may motivate firms to promote forward markets and/or vertically integrate in the procurement of inputs.

Keywords

experimental economicsforward marketprice discoveryspot market
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 29 , Issue 2 , December 1997 , pp. 327 - 336
Copyright
Copyright © Southern Agricultural Economics Association 1998

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Adam, B.D., Hudson, M.A., Leuthold, R.M., and Roberts, C.A.. “Information, Buyer Concentration, and Risk Attitudes: An Experimental Analysis.” Rev. Agr. Econ. 13(January 1991):59–71.Google Scholar
Arrow, K.J. “Vertical Integration and Communication.” Bell J. Econ. 6(Spring 1975):173-83.Google Scholar
Barkema, A., Drabenstott, M., and Welch, K.. “The Quiet Revolution in the U.S. Food Market.” Federal Reserve Bank of Kansas City, Econ. Rev. 76(May/June 1991):25–41.Google Scholar
Boehlje, M. “Industrialization of Agriculture: What Are the Implications?” Choices (1st Quarter 1996):30–33.Google Scholar
Buccola, S.T. “Price Trends at Livestock Auctions.” Amer. J. Agr. Econ. 64(February 1982):63–69.Google Scholar
Buccola, S.T.. “Risk Preference and Short-Run Pricing Efficiency.” Amer. J. Agr. Econ. 65(August 1983):588-91.Google Scholar
Davis, D.D., and Holt, C.A.. Experimental Economics. Princeton NJ: Princeton University Press, 1993.Google Scholar
Hennessy, D.A. “Information Asymmetry as a Reason for Food Industry Vertical Integration.” Amer. J. Agr. Econ. 78(November 1996):1034–43.Google Scholar
Hoffman, E., and Spitzer, M.L.. “Experimental Law and Economics: An Introduction.” Columbia Law Rev. 85(June 1985):991–1036.CrossRefGoogle Scholar
McMillan, J. Games, Strategies, and Managers. New York: Oxford University Press, 1992.CrossRefGoogle Scholar
Mestelman, S., and Welland, D.. “Advance Production in Oral Double Auction Markets.” Econ. Utters 23(1987):43–48.Google Scholar
Nelson, R.G., and Turner, S.C.. “Experimental Examination of a Thin Market: Price Behavior in a Declining Terminal Market Revisited.” J. Agr. andAppl. Econ. 27(July 1995):149-60.Google Scholar
Plott, C.R. “Industrial Organization Theory and Experimental Economics.” J. Econ. Lit. 20(December 1982):1485–1527.Google Scholar
Siegel, S., and Castellan, N.J. Jr. Nonparametric Statistics for the Behavioral Sciences, 2nd ed. New York: McGraw-Hill, 1988.Google Scholar
Smith, V.L. “An Experimental Study of Competitive Market Behavior.” J. Polit. Econ. 70(April 1962):111-37.CrossRefGoogle Scholar
Smith, V.L. “Experimental Economics: Induced Value Theory.” Amer. Econ. Rev. 66(May 1976):274-79.Google Scholar
Smith, V.L. “Microeconomic Systems as an Experimental Science.” Amer. Econ. Rev. 72(December 1982):923-55.Google Scholar
Turner, S.C., Dykes, N.S., and McKissick, J.. “Feeder Cattle Price Differentials in Georgia Teleauctions.” S. J. Agr. Econ. 23 (December 1991):75–84.Google Scholar
U.S. Department of Agriculture. Concentration in the Red Meat Packing Industry. Packers and Stockyards Programs, USDA/Grain Inspection, Packers, and Stockyards Administration (GIPSA), Washington DC, February 1996.Google Scholar
Williamson, O. Markets and Hierarchies. New York: Free Press, 1975.Google Scholar