Measuring the welfare impact of asymmetric price transmission

Abstract

Several previous studies report that prices are asymmetrically transmitted across levels in US commodity markets, but the evidence about the economic magnitude of the phenomenon is limited In this paper, we use estimated asymmetric error correction models (ECM) for producer, wholesale, and retail pork and beef prices to compute the compensating variation associated with asymmetric price transmission for US consumers Overall, the phenomenon does not have a substantial impact-the expected welfare loss for the average US beef and pork consumer is about $r1.10 per year, which is less than 1% of annual per-capita retail expenditures.