PROCESSING TECHNOLOGY, MARKET POWER AND PRICE TRANSMISSION

This paper focuses on the extent to which price changes occurring at t he farm-level are transmitted to the retail sector. A price transmissi on elasticity is derived which is shown to depend on the degree of mar ket power in the food industry and the nature of the food industry's p rocessing technology. The offsetting role of the processing technology and market power in determining the extent of price transmission are highlighted. A case-study reports values for the price transmission el asticity for the US beef and pork sectors.