Three essays concerning economic analysis associated with the supply chain

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Sherwell Cabello, Pablo
Supply Chain; Assymetric Price Transmission; Event Study; Simple Market Model; Cost Module
book description
Analyzing different aspects of the supply chain aids in understanding how firms behave, interact and respond within an industry. Some concepts used to carry out this analysis include asymmetric price transmission, event study methodology and event costing analysis. Each of these topics is discussed in this dissertation, presented as a set of three separate papers. The first paper analyzes asymmetric price transmission and elasticities of price transmission at the farm-retail level for whole and two percent milk in selected cities in the United States. The theoretical core of this paper relies on a comparison between the traditional Houck approach and the error correction model proposed by von Cramon- Taubadel and Fahlbusch. We reject the null hypothesis of symmetry for each product and city under both approaches. We also find little evidence of statistical superiority between the classic Houck approach and the error correction model. The second paper uses financial market event study methodology to calculate the economic impact on the supply chain related to one of the worst disease outbreaks in the food industry in the United States. This event began on November 3, 2003, when the Associated Press reported a hepatitis advisory in the Beaver Valley, Pennsylvania. This outbreak directly involved two publicly traded companies: Prandium and Sysco. The market model is used as the main foundation of the economic analysis. There is no evidence of abnormal rates of return or spillover effects in relation to the outbreak. However, there is evidence that volatility of returns increases after the event. The third paper develops a general conceptual economic module to quantify the impact of an animal disease outbreak. This study develops a generic economic module, which estimates cost in the face of a simulated animal disease outbreak under different mitigation strategies. This model was subsequently applied in a case study: a hypothetical case of a foot-and-mouth (FMD) outbreak in the Texas Panhandle analyzed under five different ex-post mitigation strategies. The results show that the most effective strategy is to slaughter and not to vaccinate. We conclude that analyzing the supply chain is important in understanding how markets behave.