FEEDER CATTLE PRICE SLIDES
By: Brorsen, B. Wade; Coulibaly, Nouhoun; Richter, Francisca G.-C.; Bailey, DeeVon
Brorsen, B. Wade; Coulibaly, Nouhoun; Richter, Francisca G.-C.; Bailey, DeeVon, FEEDER CATTLE PRICE SLIDES, Journal of Agricultural and Resource Economics, Volume 26, Issue 1, July 2001, Pages 291-308
A theoretical model is developed to explain the economics of determining price slides for feeder cattle. The contract is viewed as a dynamic game with continuous strategies where the buyer and seller are the players. The model provides a solution for the price slide that guarantees an unbiased estimate of cattle weight. An empirical model using Superior Livestock Auction (SLA) data shows price slides used are smaller than those needed to cause the producer to give unbiased estimates of weight. Consistent with the model's predictions, producers slightly underestimate cattle weights.