Asymmetric Information in Cattle Auction: The Problem of Revaccinations
University of Missouri Agricultural Economics Working Paper No. AEWP 2004-5
29 Pages Posted: 23 Jul 2004
Date Written: July 2004
Abstract
The paper analyzes the problem of asymmetric information between buyers and sellers in cattle auctions. An illustration is made regarding the vaccinations that the animals receive. Buyers do not know and cannot verify if sellers have vaccinated their animals forcing them to consider revaccination. Revaccination is only a part of the broader problem of information asymmetry that includes other quality issues and costs that can be saved, thereby increasing the welfare of both buyers and sellers. Structural characteristics of ranching, traditions and consumers' preferences are taken into account and a wider approach is attempted to explain the persistence of the problem in light of potential institutional solutions. We argue for a comprehensive empirical study of the incidence and impacts of buyer revaccination.
Keywords: Asymmetric information, cattle auctions, market failure
JEL Classification: Q13, Q18
Suggested Citation: Suggested Citation
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