Skip to main content
SpringerLink
Log in

Price Leadership on the National Cheese Exchange

  • Published:
Review of Industrial Organization Aims and scope Submit manuscript

Abstract

The motivation and trading behavior of the leading cheese companies on the National Cheese Exchange are examined. Although only 0.2 percent of all cheese is sold on the NCE, it is used to formula-price 90-95 percent of the bulk cheese in the U.S. Kraft General Foods, the largest buyer of cheese in the U.S., was the dominant seller on the NCE during 1988-1993, with the apparent purpose and effect of depressing national cheese prices. Kraft's behavior is consistent with that of a barometric price leader that enjoys a significant degree of discretion in shaping the pattern of prices over a price cycle. As presently organized, the NCE facilitates market manipulation.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Bain, Joe S. (1960) ‘Price Leaders, Barometers, and Kinks’, Journal of Business, 33, 193-203.

    Article  Google Scholar 

  • Caves, R. E. (1979) ‘Industrial Organization and the Problem of Thin Markets’, in M. L. Hayenga, ed, Pricing Problems in the Food Industry With Emphasis on Thin Markets. Research Division, College of Agricultural and Life Sciences, University of Wisconsin-Madison.

  • Department of Justice (1992) Horizontal Merger Guidelines, Washington, D.C.

  • Encaoua, D., P. Geroski, and A. Jacquemin (1987) ‘Strategic Competition and the Persistence of Dominant Firms’, in J. Stiglitz and G. F. Matthewson, eds, New Developments in the Analysis of Market Structure. Cambridge: MIT Press.

    Google Scholar 

  • Feinstein, J. S., M. F. Block, and F. C. Nold (1985) ‘Asymmetric Information and Collusive Behavior in Auction Markets’, American Economic Review, 34, 441-460.

    Google Scholar 

  • Geffen, R. J. (1951) ‘Antitrust Law in Wisconsin’,Wisconsin Law Review, 1951, 681-700.

  • Geroski, P. A. (1987) ‘Do Dominant Firms Decline?’, in D. Day and J. Vickers, eds, The Economics of Market Dominance. New York: Basil Blackwell.

    Google Scholar 

  • Hayenga, M. L. (1979) ‘The Concept of a Thin Market’, in M. L. Hayenga, ed, Pricing Problems in the Food Industry With Emphasis on Thin Markets. Research Division, College of Agricultural and Life Sciences, University of Wisconsin-Madison.

  • Le Roy, S. F. (1989) ‘Efficient Capital Markets and Martingales’, Journal of Economic Literature, 27, 1583-1621.

    Google Scholar 

  • Maddela, G. S. (1983) Limited Dependent and Qualitative Variables in Econometrics. Cambridge, U.K. Econometric Society Monograph.

    Google Scholar 

  • Marion, B. W. and NC117 Committee (1986). The Organization and Performance of the U. S. Food System. Lexington, MA: Lexington Books.

  • Markham, J. W. (1951) ‘The Nature and Significance of Price Leadership’, American Economic Review, 41, 891-905.

    Google Scholar 

  • Mueller, W. F., B. W. Marion, M. Sial, and F. E. Geithman (1996) Cheese Pricing: A Study of the National Cheese Exchange. Food System Research Group, Department of Agricultural Economics, University of Wisconsin-Madison.

  • Mueller, W. F. and B.W. Marion (1997) ‘Practices FacilitatingManipulation of Prices on the National Cheese Exchange’, Working Paper 115, Food System Research Group, Department of Agricultural and Applied Economics, University of Wisconsin-Madison.

  • Nicholls, W. H. (1939) Post-War Development in the Marketing of Cheese. Iowa State College, Research Bulletin 261.

  • Nicholls, W. H. (1941) Imperfect Competition within Agricultural Industries. Iowa State College Press, Ames, Iowa.

    Google Scholar 

  • Pagoulatos, E. and R. Sorensen (1986) ‘What Determines the Elasticity of Industry Demand’, International Journal of Industrial Organization, 4, 238-250.

    Article  Google Scholar 

  • Porter, M. E. (1985) Competitive Advantage. New York: The Free Press.

    Google Scholar 

  • Raikes, R. (1979) ‘Thin Markets: Some Causes, Consequences, and Remedies’, in M. L. Hayenga, ed. Pricing Problems in the Food Industry With Emphasis on Thin Markets. Research Division, College of Agricultural and Life Sciences, University of Wisconsin-Madison.

  • Scherer F. M. and D. Ross (1990) Industrial Market Structure and Economics Performance. Boston: Houghton Mifflin Co.

    Google Scholar 

  • Schrader, L. (1985) ‘Pricing and Vertical Coordination in the Food System’, in B. W. Marion and NC117 Committee. The Organization and Performance of the U. S. Food System. Lexington: Lexington Books.

    Google Scholar 

  • Stigler, G. J. (1947) ‘The Kinky Oligopoly Demand Curve and Rigid Prices’, Journal of Political Economy, 55, 444-446.

    Google Scholar 

  • Utton, M. A. (1995) Market Dominance and Antitrust Policy.Brookfield, Vermont: Edward Elgar Publishing Limited.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. 427 Lorch Street, Madison, WI, 53706, U.S.A

    Willard F. Mueller, Bruce W. Marion & Maqbool H. Sial

Authors
  1. Willard F. Mueller
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Bruce W. Marion
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Maqbool H. Sial
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Mueller, W.F., Marion, B.W. & Sial, M.H. Price Leadership on the National Cheese Exchange. Review of Industrial Organization 12, 145–170 (1997). https://doi.org/10.1023/A:1007754801740

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/A:1007754801740

Search

Navigation