cultural Economics, University of Wisconsin-Madison. I thank

A model of the farm-retail price spread for beef is specified under rational expectations, in which systematic risk response on the part of marketing intermediaries i allowed. The three-equation structural model contains potentially time-varying risk terms in margin and supply equations, which I approximate and estimate using a multivariate GARCH-in-Mean approach. The estimated model is used to infer relative risk premia in beef margins, and to simulate short-run equilibrium risk effects. Results indicate that price risk has, at times, had substantial impacts on farm and retail beef prices and production. Key words: beef market, farm-retail margins, GARCH-M models, price risk, rational expectations. Following the pioneering work of Behrman and Just, numerous tudies have attempted to quan-tify the role of risk in agricultural supply equa-tions (Antonovitz and Green; Aradhyula and Holt). More recently, the effect of risk on mar-keting margins of agricultural products has been examined. Using a variant of Sandmo's model of the firm under output price uncertainty, Bror-sen et al. show that marketing channel inter-mediaries also may be impacted by output (de-mand) price risk. Brorsen et al.'s model has been extended by Schroeter and Azzam to allow for possible noncompetitive behavior on the part of marketing firms. More work on this topic is required. First, prior studies have not recognized that, in an expected utility framework, expectations must be taken with respect o both the mean and variance of output price. Accordingly, the appropriate de-pendent variable in a risk-responsive margi