Price discovery at Queensland cattle auctions

Williams, Christine H. (1993). Price discovery at Queensland cattle auctions PhD Thesis, School of Land, Crop and Food Sciences, The University of Queensland.

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Author Williams, Christine H.
Thesis Title Price discovery at Queensland cattle auctions
School, Centre or Institute School of Land, Crop and Food Sciences
Institution The University of Queensland
Publication date 1993
Thesis type PhD Thesis
Total pages 352
Language eng
Subjects 070106 Farm Management, Rural Management and Agribusiness
Formatted abstract The discovery of efficient and accurate prices is fundamental to the efficient allocation of resources within a market economy. Yet, the detail of how the price discovery process operates for any particular product or marketing channel is overlooked in neoclassical economics. The assumptions of perfect information and product homogeneity on which much of neoclassical economics is built, makes the process of price discovery a trivial matter. When these assumptions are replaced by more realistic assumptions, price discovery becomes a topic of major importance. In this thesis, the process of price discovery at live cattle auctions in Queensland is investigated and its success in generating efficient and accurate prices is assessed.

Two aspects of price discovery are examined in the context of live cattle auctions: the process of price discovery for a good of heterogeneous form at a particular time and place; and the process of price discovery when a product of relatively homogeneous form is traded at a number of spatially and temporally separate markets. The market reporting activities of the Queensland Livestock Market Reporting Service are evaluated as a source of information designed to improve the price discovery process.

Two separate methodologies are employed. Price discovery for heterogeneous products is analysed within an hedonic price framework while recently developed cointegration techniques are used to investigate the relationship between prices at spatially and temporally separate markets.

The results of this study have implications for the future development of the Livestock Market Reporting Service in Queensland and elsewhere. In particular, the study identifies an important characteristic of live cattle which has the potential to increase substantially the information content of cattle market reports. In addition, the results indicate that resources of the market reporting service could be concentrated on the markets identified as dominant in the price discovery process without reducing the usefulness of market reports. The question of how to define geographic markets for a product is also considered and a methodology which could be employed to aid in this important aspect of policy is suggested.
Keyword Cattle trade -- Prices -- Queensland.
Pricing -- Mathematical models.
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