Acreage Response and Demand for Processing Tomatoes in California

Abstract

A theory of contracting is developed to show how acreage and price might be determined in the raw tomato market. The paper estimates the structural parameters of the acreage response and demand for processing tomatoes facing California growers. Several hypotheses of leadership pricing are tested. Results show that the California processing industry can be characterized as a competitive industry, since the leadership pricing as observed is consistent with the competitive pricing. Acreage response is shown to be price elastic. The adoption of the tomato harvester is found to have a significant impact on acreage response.