A markup over average cost pricing rule for meat and poultry in the United States
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This paper tests the hypothesis that meat and poultry wholesalers choose their inventory
levels together with wholesale price so as to maximize profit made over the sales time of
their stock. The behavioral assumption predicts that markup over average cost will match
the inverse of the price elasticity of the sales time of inventory. Price elasticity of inventory
sales time is estimated for beef, pork and poultry accounting for the simultaneity between
these pricing decisions by adopting a systems approach. The estimated range for the inverse
of these elasticities includes all the markups applied over the sample range of the time
series.