Observable Raw Milk Prices:
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.
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.