Walter N. Thurman

Testing the Theory of Tournaments: An Empirical Analysis of Broiler Production

Broiler chickens are raised by contract growers whose rewards depend explicitly upon relative performance. We use data on the performance of broiler producers facing both tournament and linear performance evaluation compensation structures to test three predictions from the theory of tournaments: that changes in the level of prizes that leave prize differentials unchanged will not affect performance; that, in mixed tournaments, more able players will choose less risky strategies; and that tournament organizers will attempt to handicap players of unequal ability or reduce mixing to avoid the disincentive effects of mixed tournaments. Our evidence is consistent with each prediction.

Don't Count Your Chickens...: Risk and Risk Shifting in the Broiler Industry

The contracts used to reward growers of broiler chickens in the United States base pay on a growers performance relative to other growers. From a panel of data covering seventy-five growers over four years, we use simulation methods to measure the price and production risk shifted from growers to integrator companies by these contracts. We also decompose the risk in broiler production variability. We conclude that the bulk of the risk in our sample, which is primarily price risk, is shifted from growers through the use of production contracts.

Restricting the Market for Quota: An Analysis of Tobacco Production Rights with Corroboration from Congressional Testimony

Regulatory programs that restrict output levels often impose restrictions on the transfer of rights to produce or to use particular inputs. In this paper, we use a unique cross-section, time-series data set from North Carolina to quantify the welfare effects of transfer restrictions for poundage quota under the U.S. flue-cured tobacco program. We find that the deadweight costs of such restrictions are small but that the distributional effects are substantial. We analyze congressional testimony on quota transfer legislation and conclude that our estimates of the distributional effects are consistent with expressed views of market participants.

Endogeneity Testing in a Supply and Demand Framework

The powers of Wu-Hausman endogeneity tests are related to the normalization d ecision in estimating demand equations. Power is not invariant to the choice bet ween quantity and price as the dependent variable. A theoretical result due to N akamura and Nakamura_(1984) is used to explore the dependence of power on parame ters of the supply and demand system. The theoretical result is corroborated wit h a Monte Carlo experiment. The power results are used to analyze the U.S. deman d for poultry meat wherein price, but not quantity, is found to be predetermined Copyright 1986 by MIT Press.

The Poultry Market: Demand Stability and Industry Structure

The stability of the demand for poultry meat and specification issues in its estimation are explored. The analysis concludes that the demand for poultry meat shifted out in the early 1970s. At the same time, the demand relationship between poultry and pork changed from substitution to independence. A second conclusion is that poultry price is predetermined for demand in annual U.S. data, while quantity is not. A predetermined price suggests several market structures. Exogeneity tests are performed to distinguish among them. The results are consistent with a competitive, constant returns-to-scale-industry facing elastic factor supplies.

Health Risk and the Demand for Red Meat: Evidence from Futures Markets

is extensive. Since 1977, a large number of studies have documented instabilities in aggregate meat demand equations estimated from time series data. (See Braschler; Chavas; Choi and Sosin; Dahlgran; Moschini; Moschini and Meilke [1984, 1989]; Nyankori and Miller; and Thurman.) The modal conclusion from these studies is that per-capita demands for red meats, beef, and pork have shifted inwards over time and that per-capita demands for poultry and fish have shifted out. In studies attempting to pinpoint the timing of shifts, the shifts seem to have occurred, or to have begun, in the mid-tolate 1970s. These studies are not without their critics.

Honey Bee Pollination Markets and the Internalization of Reciprocal Benefits

The worlds most extensive markets for pollination services are those for honey bee pollination in the United States. These markets play important roles in coordinating the behavior of migratory beekeepers, who both produce honey and provide substitutes for ecosystem pollination services. We analyze the economic forces that drive migratory beekeeping and theoretically and empirically analyze the determinants of pollination fees in a larger and richer data set than has been studied before. Our empirical results expand our understanding of pollination markets and market-supporting institutions that internalize external effects. Copyright 2012, Oxford University Press.

Economic and market issues on the sustainability of egg production in the United States: Analysis of alternative production systems

Conventional cage housing for laying hens evolved as a cost-effective egg production system. Complying with mandated hen housing alternatives would raise marginal production costs and require sizable capital investment. California data indicate that shifts from conventional cages to barn housing would likely cause farm-level cost increases of about 40% per dozen. The US data on production costs of such alternatives as furnished cages are not readily available and European data are not applicable to the US industry structure. Economic analysis relies on key facts about production and marketing of conventional and noncage eggs. Even if mandated by government or buyers, shifts to alternative housing would likely occur with lead times of at least 5 yr. Therefore, egg producers and input suppliers would have considerable time to plan new systems and build new facilities. Relatively few US consumers now pay the high retail premiums required for nonconventional eggs from hens housed in alternative systems. However, data from consumer experiments indicate that additional consumers would also be willing to pay some premium. Nonetheless, current data do not allow easy extrapolation to understand the willingness to pay for such eggs by the vast majority of conventional egg consumers. Egg consumption in the United States tends to be relatively unresponsive to price changes, such that sustained farm price increases of 40% would likely reduce consumption by less than 10%. This combination of facts and relationships suggests that, unless low-cost imports grew rapidly, requirements for higher cost hen housing systems would raise US egg prices considerably while reducing egg consumption marginally. Eggs are a low-cost source of animal protein and low-income consumers would be hardest hit. However, because egg expenditures are a very small share of the consumer budget, real income loss for consumers would be small in percentage terms. Finally, the high egg prices imposed by alternative hen housing systems raise complex issues about linking public policy costs to policy beneficiaries.

On Interpreting Inverse Demand Systems: A Primal Comparison of Scale Flexibilities and Income Elasticities

Scale flexibilities in inverse demand systems describe how marginal valuations change with expansions in the consumption bundle. Such effects clearly are related to income elasticities in direct demand systems. However, the connection is not so close as it first appears. We argue that the link between scale flexibilities and income elasticities is tight only if preferences are homothetic, a situation where neither measure is interesting, or if all elasticities of substitution are unitary. We make clear the relationship between the two measures in a coordinate system focusing on how marginal rates of substitution change with consumption scale and proportion. Copyright 1999, Oxford University Press.

Chickens, Eggs, and Causality, or Which Came First?

Time-series evidence from the United States indicates unidirectional causality from eggs to chickens.