Abstract: This study analyzes retail milk pricing by supermarkets and marketing margin behavior for four fluid milk products in nine large metropolitan markets in the Western United States. Three empirical measures provide significant evidence of noncompetitive price behavior in each of the markets. Correlations of retail price changes indicate considerable pricing independence among retailers across cities, while rankings of retail prices by milk product provide significant evidence that prices are not based primarily on costs, as would be true if pricing were competitive. Estimated retail price responses to farm price changes are consistent with monopoly pricing behavior for several of the milk products in several of the markets.
See PDF article here: Supermarket Fluid Milk Pricing Practices in the Western United States by Carman, H.F. and R.J. Sexton. Agribusiness, in press (2004).