RISK AND MARKET PARTICIPANT BEHAVIOR IN THE U.S. SLAUGHTER-CATTLE MARKET

Incomplete information generates uncertainty for market participants in the slaughter-cattle market. Buyer and seller behavior in the presence of that uncertainty is examined. Statistically significant risk premiums are charged by packers when buying slaughter cattle on either a live- or dressed-weight basis compared to buying on a grade-and-yield basis. Pratt-Arrow risk-aversion coefficients are calculated for buyers and these remain constant over all marketing methods. Sellers market cattle under all three marketing methods, suggesting producers’ attitudes toward risk (risk-aversion coefficients) vary.