An Empirical Study of Competition in the Price Discovery Process for Slaughter Lambs

Buyer competition in the price discovery process for slaughter lambs at an Oklahoma teleauction was studied. Number of buyers positively influenced both absolute and relative sale prices but did not significantly affect buyer gross margins. Buyer market shares also affected prices paid and buyer gross margins. Thus, competition among buyers was found to be impor-tant in the price discovery process. Morgenstern argued in the early 1970s that economic theory had contributed lit-tle toward understanding the price for-mation process. A decade later, R. Ward placed the pricing process among the priority topics on the research agenda for agricultural marketing economists. One element of the pricing process is the im-portance and impact of competition (as measured by the number, size, location, and efficiency of buyers) on price level. Paul noted that industrial organization economists deal with price performance at a relatively aggregative level. Relative-ly little empirical evidence exists regard-ing the importance of buyer competition on prices received by sellers at the firm level. Menkhaus, et al. suggest data limi-tations rather than lack of interest pre-clude economists from empirically study-ing structural impacts on prices for agricultural commodities. This article reports results of an empir-ical analysis of the importance and impact of competition among buyers in the pric