David Gross writes:
At root, the global forces that are driving up the price of food don’t
significantly affect the vacation lobster business in Maine. Commercial
and consumer demand doesn’t vary much for off-the-boat lobster. Sure,
many lobsters are sold to processing plants. But unlike other seafood
products–think of canned tuna, or clam sauce, or frozen fish
fillets–lobster is not produced or marketed on a mass global scale,
which also means there are no speculators trying to make a killing on
lobster futures. The fact that people are eating more and better in
China and India isn’t much boosting the demand for lobsters from Maine.
Even in the United States, lobster remains to a large degree a regional
Consistent with Gross’s hypothesis, lobster is phenomenally expensive in Chile right now, in either absolute terms or especially in relative terms (compare for instance to Chilean sea bass, which is half the U.S. price or less but Chilean lobster is at least twice the U.S. prices from a sample of n = 2; Chilean sea urchin is cheap too and delicious).
But why is lobster cheaper? Gross samples prices in Maine and higher gas prices may mean lower demand from tourists. But I am a little confused by Gross’s additional explanation:
Distributors seeking to maintain their margins are cramming down the
fishermen. And with limited local outlets (even swelled by summer
visitors, the population of coastal Maine is relatively small),
lobstermen can’t hold out for higher prices.
Imagine a multi-product firm which applies mark-ups on different commodities. (If everything is perfectly competitive there won’t be cross-product effects.) If the marginal cost of buying salmon goes up, can the mark-up on lobster then go down? Is it that the retailer, now faced with higher salmon costs, "threatens bankruptcy" to get a better result from the bargaining game with the lobster supplier?