Evaluating the performance of dairy marketing systems : a stimuli response approach

Modern agricultural marketing systems are often highly complex structures with a range of inter-linking players operating within diverse trading environments. To compare the effectiveness of one agricultural marketing system against another is no easy task. It is typically attempted by assessing which system has the greatest effect on farm level prices, or at best the aggregate economic benefits to the economy as a whole. In such analysis it is normally reasoned that competitive marketing systems provide the norm against which existing systems are compared, because it is further assumed that market solutions are welfare maximising. Such reasoning is the basis of the Structure, Conduct and Performance paradigm that has been widely used in industrial organisation studies and has often been used as the basis for recommending change to marketing systems or for industry legislation. While this approach may be useful for analysing situations where there are high levels of intervention, it may be limiting where interventions are more subtle or where there may be considerable differences in the industry structures. The UK and New Zealand dairy marketing structures are analysed in this paper as an illustration of such a problem