Low‐Price Low‐Capacity Traps and Government Intervention in the Québec Hog Market
Bibliographic record
Abstract
This paper investigates the marketing of a primary commodity produced by competitive producers that sell to a single downstream processor. There is a significant lag between production and marketing decisions made by producers. If a credible price commitment cannot be made before producers make their output decision, it is a dominant strategy for the processor to buy producers' output at the world price adjusted for transportation costs. Producers fully anticipate this partial holdup ex ante and adjust production accordingly. When the processor's capacity is binding ex post, the equilibrium is described as a low‐price, low‐capacity trap. Under a specific condition, the processor finds it advantageous to credibly commit to a price increment before producers make their output decision. The ensuing equilibrium is Pareto‐superior to the no‐commitment equilibrium. We argue that the Québec hog/pork industry has experienced such a situation in the past few years. Government intervention is justified even if the processor has committed to a price increment. The modeling of strategic interactions between the government and the processor reveals that their price increments are strategic substitutes. However, given that the processor's (government's) payoff is increasing with the government's (processor's) price increment, the first‐mover advantage entails committing early to a low‐price increment to force one's rival to offer a high‐price increment. Cet article analyse la mise en marché d'un produit primaire vendu par des producteurs preneurs de prix à un seul et unique transformateur. Les décisions de production et de mise en marché sont séparées dans le temps. Si le transformateur ne peut pas s'engager à payer un certain prix avant que les producteurs prennent leur décision de production, alors la stratégie dominante du transformateur est d'offrir aux producteurs le prix mondial diminué par les coûts de transport. Les producteurs anticipant ce hold‐up partiel et réduisent leur production en conséquence. Lorsque le transformateur est confrontéà une contrainte de capacité ex post, les producteurs et le transformateur sont piégés dans un équilibre de « petit prix et petit volume ». Si une condition est respectée, il peut être avantageux pour le transformateur d'offrir un supplément aux producteurs avant leur décision de production. L'équilibre qui s'en suit constitue alors une amélioration au sens de Pareto. Nous soumettons que l'industrie porcine québécoise a vécu pareille expérience durant les dernières années. L'intervention du gouvernement demeure justifiée même si le transformateur s'est commis à payer un supplément. En fait, les interventions du transformateur et du gouvernement sont des substituts stratégiques. Puisque le gain du transformateur (gouvernement) croit avec le supplément offert par le gouvernement (transformateur), il y a un avantage àêtre le premier à se commettre à payer un faible supplément, tant pour le transformateur que pour le gouvernement, pour ainsi forcer l'autre partie à offrir un supplément plus généreux.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.002 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.000 |
| Science and technology studies | 0.002 | 0.002 |
| Scholarly communication | 0.003 | 0.001 |
| Open science | 0.001 | 0.001 |
| Research integrity | 0.001 | 0.001 |
| Insufficient payload (model declined to judge) | 0.013 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".