On the economic rationality of market participants: The case of expectations in the US pork market

This study investigates the nature of price expectations in a competitive m arket. The approach is illustrated in an application to the U.S. pork marke t, which exhibits cyclical patterns and biological production lags. Pork pr ice equations are estimated under different expectation regimes. The empiri cal results suggest the presence of heterogeneous price expectations among market participants. A large proportion of the market (73%) is found to be associated with backward-looking expectations, where future prices are anti cipated on the basis of their observed historical patterns.