MILK PRICES 197 



larly if it were feared that the company might not be will- 

 ing to take all the milk offered. 



In sections where small and large dealers operate side 

 by side, the price has usually been named by the larger 

 dealer. The smaller dealers watch the larger ones and 

 pay approximately the same prices. 1 The larger dealer 

 is able to gage more accurately the conditions of supply 

 and demand than can the small dealer. He is not as free, 

 however, to fix a price which suits him as is commonly 

 supposed. Assume, for example, that he buys milk at too 

 low a price. Some farmers are quite certain to curtail 

 their production or divert their milk to other channels, and 

 he will find himself confronted with a shortage of milk. 

 Hence he will have to pay more. On the other hand, 

 suppose he buys milk at too high a price; he will very soon 

 find himself with too large a supply on hand, and unless 

 he takes all milk offered at this high figure, competitors 

 will be able to buy milk at a lower price, which will enable 

 them to cut under his selling price. Small dealers in par- 

 ticular are wont to cut prices at every opportunity. Hence, 

 if they were able to buy more cheaply, they would quite 

 certainly undersell the large dealer. The result is that 

 the large dealers learn to come very close to a proper de- 

 cision as to what price will bring supply and demand to an 

 equilibrium. The fact that the smaller dealers usually 

 follow closely the prices offered by the larger dealer 

 often gives the appearance of combination, and such 

 coincidence or tacit agreement has on numerous occa- 

 sions been made the basis for grand jury investiga- 

 tions. 



The practice on the part of the dealers of posting a 

 price and trying to rush farmers into signing the contract 



1 Duncan, C. S., Jour, of Pol. Econ., Apr., 1918, p. 344. 



