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The purpose of this paper is to present a new model to empirically analyze retail pricing dynamics led by the competition between retailers, using fluid milk markets of three US metropolitan areas as a case study. The research is important for Chinese public policy makers to find the reasons of retail price fluctuations and provides policy makers with the direction and rationale to intervene in retailing markets.

This paper empirically applies dynamic oligopolistic competition model using Markov switching regression. The dataset used in this study includes 58 four‐week‐ending observations covering the period from March 1996 to July 2000 for three cities, Boston, Dallas, and Seattle.

The empirical results illustrate the Markov switching regression not only successfully identifies the Markov perfect equilibrium in each market, but decomposes the retail price series into the corresponding equilibrium regimes. The forecasting power of the model is surprising so it can serve as a price monitor of the government. Additionally, the model reveals the different consumer welfare implications given different price regimes. The welfare analysis shows that consumers are most likely to be worse off through price fluctuations, while they are not always better off through a sticky (stable) price series in a market.

The first limitation of the paper is the retail price data is four‐week ending. If a cycle evolves faster within four weeks, the model would overestimate the duration and underestimate the amplitude of cycles. So the study serves as an upper bound of the reality. The second limitation is the number of regimes. More than three regimes studied in a Markov switching regression may cause a series of empirical issues. However, if we integrate several regimes into one regime, we will lose rich information about the competitiveness of the markets.

This paper is the first work to apply the dynamic pricing analysis to food industry by using fluid milk market as a case study. This paper empirically identifies four retail pricing regimes in fluid milk price series and evaluates the characteristics of the regimes.

This paper assesses the welfare implications of each pricing regime. The results show that the forecasting power of the model is strong in fluid milk retail market. Therefore, the study could serve as a price monitor to the public policymaker.

This paper presents the first study to apply dynamic oligopolistic competition model to food marketing research.

The purpose of this paper is to investigate the relationship between transaction costs and the performance variance of peasant households and specialized cooperatives, as well as to explore whether or not this relationship varies across different regions in China.

Based on the transaction cost theory (TCT) and the contingency theory (CT), a survey was undertaken at county level to support the main effects and moderating effects and the results were analyzed using a general linear model. A complementary case study was also used to further discuss the results.

It was found that the change rate of peasant households’ scope of operation is sensitive to inadequate market information, purchase and sales expense and resolving disputes expense. In terms of specialized cooperatives, the change rate of their scale of operations is sensitive to inadequate market information, the chances of violating an agreement and incomplete norms. The moderating effect of regional classification is supported in terms of purchase and sales expenses on the performance variance of peasant households, and in terms of inadequate market information on the performance variance of specialized cooperatives.

First, the data were collected at the county level, which could only reflect the conditions of the macro-environment. Second, many variables were designed as dummies for the sake of brevity and efficiency, because the respondents were officers in local agricultural departments. Third, transaction costs may not have a direct effect on the variance of productivity but indirect through many potential mediators.

The results not only provide useful information for agricultural operators to analyze the transaction costs related to their forms of organization, but also impartial advice for policy makers to consider the form of agricultural operators in different regions.

This study focusses on the role of the external environment by integrating the TCT and CT theory. Furthermore, it seeks to explore whether the relationship between transaction costs and the performance variance of peasant households and specialized cooperatives varies across different regions of China.