PRICE STABILIZATION IN A TWO-SECTOR INDUSTRY

Supermarkets now sell over a third of fresh fruit and vegetables sold in Britain and most of this is obtained directly from prepackers and importers who have contracts with the growers. Greengrocers, on the other hand, buy mainly through wholesale markets. Supermarkets stabilize retail prices more than the greengrocers do, though there need be no difference in their margin. This policy affects the average revenue curves of the growers, making that of the contract growers more elastic, and that of non-contract growers less elastic. The implication of this, in relation to market margin analysis and the implications to growers are discussed.