Observable Raw Milk Prices:
Chance for Dairy Farmers – Risk for Final Consumers

Andreas Hildenbrand, Rainer Kühl

Published: 29.02.2016  〉 Volume 65 (2016), Number 1, 65-72  〉 Resort: Articles 
Submitted: N. A.   〉 Feedback to authors after first review: N. A.   〉 Accepted: N. A.

ABSTRACT

Whether observable raw milk prices are more likely to increase or decrease the economic situation of dairy farmers is in dispute. Using a game-theoretic model, we show that observable raw milk prices can be restrictive and profitable for dairies if the tendency towards concentration in the dairy sector persists. Whereas observable raw milk prices open a chance for dairy farmers to receive a higher producer surplus, they carry a risk for final consumers to receive a lower consumer surplus. In particular, we argue about cooperatives because they are predominant in the dairy sector. Our findings can be generalized to other organizational forms in the dairy sector because similar organizational structures are established by long-term contracts.
CONTACT AUTHOR
DR. ANDREAS HILDENBRAND
Institut für Betriebslehre der Agrar- und Ernährungswirtschaft,
Justus-Liebig-Universität Gießen
Senckenbergstraße 3, 35390 Gießen, Germany
E-Mail: andreas.hildenbrand@agrar.uni-giessen.de
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