Perfect farm‐retail price transmission sometimes is taken to mean an elasticity of price transmission (EPT) equal to 1. We show that this definition is inconsistent with Gardner's (1975) model. We also show that the absolute marketing margin (defined as the difference between the retail price and farm price) responds differently to shifts in retail demand, input supply, and technical change in the marketers’ production function than does the relative marketing margin (defined as the ratio of the retail price to the farm price). The empirical implications of these results are discussed in some detail.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.