4 New Hampshire Experiment Station [Bulletin 332 



Consequently, freely competitive conditions (in the economic sense) are 

 rarely found. Instead, varying degrees of monopoly are the rule. Numbers 

 of buyers and sellers are not "large". Recognition is given to the reaction 

 of competitors. Products are differentiated. 



Not only then is it necessary to reckon with a system in which mon- 

 opolistic elements are important, but also with a system in which prices 

 at all stages of the marketing process are determined by administrative 

 action. Thus the possibility, postulated by classical economists, that eco- 

 nomic forces would, if left alone, work in the direction of the maximum 

 efficiency of production and distribution is no longer present in most 

 milk markets. 



With this divergence of conditions from those of perfect competi- 

 tion, and with the presence of administrative price making bodies, most 

 milk markets are left without any automatic mechanism to bring prices 

 and charges into proper alignment with conditions of consumption, pro 

 duction, and distribution. 



Administrative agencies, if they are to introduce improved methods 

 and remove inefficiencies in the distribution of milk, must have criteria 

 to guide them in the determination of prices and allowances. The need 

 for these arises from the influences which such prices and allowances as 

 are set, have upon the amount of milk produced, M'here it is produced, the 

 \\ hole process of its assembly and distribution, and finally, its consump- 

 tion. Indeed, in the absence of regulation or ownership of production 

 and distribution, prices are the mechanism by which the whole produc- 

 tive and distributive picture is determined. Because of this prime import- 

 ance of prices and allowances, the powers which a control agency assumes 

 when it undertakes to set them, are extremely broad and far-reaching. 



Without a knowledge of the efi^ects of various price policies, only 

 by accident will those prices be set which are in the public interest, or in 

 the interests of the industry itself, (which two may or may not coincide). 

 They may, if not actually leading to greater inefficiency, at least perpetu- 

 ate present inefficiencies and discourage the introduction of new and im- 

 proved methods. Present conditions are not a sound basis on which to 

 build; they may be far from those which perfect competition would 

 bring about. 



It is here that the research worker can make an important contribu- 

 tion. All agencies concerned with the determination of prices and allow- 

 ances, can function intelligently only wdien they understand the manner 

 in which economic factors operate in the market. The research worker, 

 by supplying this information, even for only a part of the marketing 

 process, is rendering a service. Only through the understanding and use 

 of such information can administered prices be set at levels which will 

 encourage adoption of improved methods of production and distribution, 

 equate consumption \\ith production, and promote stability in the in- 

 dustry. 



INTRODUCTION 



This study of milk prices, together with the three studies of New 

 Hampshire milk markets which preceded it, undertakes to supply infor- 



