Pricing Stallion Seasons for an Individual Stallion: The Existence of Top Tier Pricing and Market Power

Losey, Robert and Lambert, Thomas (2020): Pricing Stallion Seasons for an Individual Stallion: The Existence of Top Tier Pricing and Market Power.

Abstract

This paper is an academic treatment of the pricing of stallion seasons (a “season ” confers the right to breed a mare to a stallion) The commercial stallion seasons market can be represented schematically as a triangle that normally has a single-digit number of stallions offering high-priced seasons in the narrow apex, a moderate number of stallions composing the middle section, and over 150 in the $5,000-$10,000 range. We argue that it is logical for profit-maximizing stallion managers, most especially those in the apex of the stallion seasons triangle, to charge different prices for different groups of buyers of the same stallion seasons. Some of the reasons are straightforward: seasons are worth less as the breeding season progresses because foals produced later in year from those seasons are worth less. Other reasons have more to do with the somewhat monopolistic nature of the market for stallion seasons as explained in this paper. This market power, in turn, creates multiple demand curves for different market segments. As for artificial insemination (AI), the economics of this analysis suggests that breeders significantly benefit from the introduction of AI because costs tend to fall and the choices of potential stallions available to mares would be expanded as better stallions breed more mares. Though the average breeder would benefit, there would be losers from a change in the status quo. Not surprisingly, those who stand to would lose from a move to AI argue against such a move.

• Item Type: MPRA Paper
• Language: English
• Keywords: artificial insemination, breeding, competition, monopolistic competition, monopoly, oligopoly, seasons contracts.
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance; L - Industrial Organization > L8 - Industry Studies: Services; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q19 - Other

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