The motivation and trading behavior of the leading cheese companies on the National Cheese Exchange are examined. Although only 0.2 percent of all cheese is sold on the NCE, it is used to formula-price 90-95 percent of the bulk cheese in the U.S. Kraft General Foods, the largest buyer of cheese in the U.S., was the dominant seller on the NCE during 1988-1993, with the apparent purpose and effect of depressing national cheese prices. Kraft's behavior is consistent with that of a barometric price leader that enjoys a significant degree of discretion in shaping the pattern of prices over a price cycle. As presently organized, the NCE facilitates market manipulation.
Review of Industrial Organization – Springer Journals
Published: Sep 29, 2004
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