Asymmetric Adjustments in Vertical Price Transmission in the US Beef Sector: Testing for Differences among Product Cuts and Quality Grade

This study examines the dynamic relationship between wholesale and retail prices of beef products, accounting for product differentiation in cuts and quality grades. We test for long-run association in price transmission relationship in presence of asymmetry caused by threshold-type adjustments. The results indicate that there are significant asymmetric effects such that decrease or increase in wholesale beef prices tend to have different effects on the retail beef prices, and this effect varies across quality grades. Superior quality beef tend to show longer persistence to increase in prices and are adjusted at a slower rate than relatively inferior quality beef. This shows that adjustment of beef prices at retail market is influenced by the level of quality, thus supporting our original hypothesis.