Vertical Control and the Farm-Retail Price Spread for Eggs

Between 1973 and 1983, the portion of eggs produced under contracts or vertical integration increased from an estimated 62 percent to 88 percent. This article adduces and tests two hypotheses to explain the effects of the increased vertical control on industry performance. The results suggest that deficiencies in the market mechanism rather than anticompetitive factors are responsible for the increased vertical control. The farm-retail price spread for eggs between 1973 and 1983 declined 42 percent in real terms; about 58 percent of this decline is estimated to be attributable to increased vertical control.