| Exogenous shocks in agriculture can occur from weather conditions, disease outbreaks, increased technology, and many other factors. Understanding the effects of these shocks on market outcomes could provide a better understanding of the agribusiness sector and food supply chain as it moves away from competitive institutions and toward more privately negotiated transactions. Laboratory experimental methods are used to investigate the impacts of supply and/or demand shocks on prices, quantities traded, and earnings in both a forward and spot market. Results suggest buyers may have a bargaining advantage as the trend towards private negotiation continues. Buyer and seller earnings are generally lower in private negotiation when risk is present, compared to a competitive institutions. Even though overall surplus is less in private negotiation, the disparity in buyer and seller earnings is generally less. As this trend continues, sellers will be better off moving toward forward delivery mechanisms and away from spot delivery. This is a departure from the previous experimental studies. |
